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Digitization and millennials are redefining the travel industry


  • Overview of the global travel industry
  • Look into progress and growth factors of the digital travel industry
  • Future outlook of the digital travel space

 

Despite the ever-increasing and unpredictable nature of the global economic environment, travel & tourism continued to be resilient, contributing approximately 10.4% to Global GDP in 2018 as per data by World Travel & Tourism Council (WTTC). This growth, in turn, enables job creation, making Travel & Tourism an engine for employment opportunities as well. The travel and tourism sector already supports one of every ten jobs in the world and has also accounted for one of every five jobs created across the world over the past five years (as per report by WTTC). The travel & tourism sector is one of the most dynamic contributors to an economy – thanks to a growing middle class, improved connectivity both in terms of physical and digital, which has led to an insatiable appetite to explore and travel the world. Also, rapid technological advancement has fueled this online growth within the travel industry with devices such as smartphone, tablets and laptops penetrating the majority of the people and households. This solid growth enabled the travel & tourism sector’s growth to register a growth rate of 3.6% in 2019 from that of 2018, outpacing the overall growth of the global economy for the eighth consecutive year.

Within the travel industry, the online travel industry segment and young travelers have fueled the rapid growth of the industry with their increased travel itineraries. The global online travel market was worth more than $756 billion in 2019, and is expected to reach approximately $818 billion by 2020, registering a healthy growth rate of 8.2% in between the period. Of the many factors that have fueled the growth for the online travel space, the intense percolation of internet and increasing use of social media have had major impact on the growth of the industry. The online travel segment has continued to enjoy an increase in popularity because of travelers looking for superior deal packages provided by the online travel players and also the flexibility in their booking options.

Today’s online travel market is made easy with digital travel disruptors and innovators such as Airbnb and other very popular travel sites such as TripAdvisor and Booking.com. For these travel brands, providing a superb experience starts even before their customer’s trips begin. Looking into some of the major online travel companies globally, their combined revenues grew at an average of 10% as of 2019, compared to that of 2018. Of the ten companies in focus, Booking Holdings and Expedia accounted for majority of the revenue share (more than 70% of combined revenues), as they expand their non-traditional inventory for accommodation to compete against the likes of Airbnb. Looking into the revenue pattern of some of the travel companies for the past 5 years, all with the exception of a few (though they also did have positive growth rate) have registered a strong compounded annual growth rate (CAGR) much above 10%.

With the growth of digitization in the travel industry, there is this new generation of travelers for whom a vacation is no longer defined by only where one stays, but what one does – the overall experience. Millennials are the fastest growing consumer demographic, spending nearly $600 billion every year, and businesses in every industry are targeting this high-potential demographic across all markets – from luxury goods market, real estate, technology, retail and travel. The rise in popularity of what is called the “experience economy” among the millennials has resulted in the growth of the ultimate experience, travel, among them. Various research studies done by research houses suggests that millennials are looking for travel experience where they can learn something new. Meeting the requirements of the millennials has required a strong shift in strategy for the travel industry players. Their needs are far more sophisticated, detailed with constant feedback than what the industry has traditionally been used to. But the global travel industry is up for the challenge and is actively providing these young travelers with exclusive and unique travel experiences. Also, with millennials being the first generation to have their entire lives, or nearly so influenced by digital technology, the growth in millennial travels and digital travel platform has gone hand-in-hand. But as more and more millennials travel, the more the travel industry needs to evolve to meet the changing consumer demand.

Travel industry has over the period evolved, going through major transformations, from the introduction of air travel to the easy access of internet. The digital travel industry has made a dramatic shift over the past few years. What used to be an industry with travel agents and desktop-based searches only is now driven by mobile technology. Data analytics has also enabled tech-savvy travelers to customize its booking and travel experiences, while at the same time helped travel brands study their customers and offer them a customized offering. Other innovative technology that are creeping their way in this multi-billion-dollar industry and ready to disrupt the industry are voice commands, augmented reality, virtual reality, blockchain and most commonly Artificial Intelligence (AI). AI, an evolved innovation, is now actively used in the travel industry to predict the best routes and buy the cheapest tickets by almost all the major online travel platforms. Improving client experiences by offering them a unique experience will lead the way ahead. The travel industry is on the verge of a revolutionary leap where the relationship between the customers and the travel brands will become truly real-time and relevant.

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