Key US travel industry growth drivers for 2018
Travel and tourism is one of the world’s fastest-growing sectors, with bookings hitting close to $1.6 trillion in 2017.1 A strengthening global economy lies at the heart of industry growth. Each year, the global traveler pool is flooded with millions of new consumers from both emerging and developed markets, many with rising disposable incomes and a newfound ability to experience the world.
Below are just some of the forces poised to drive revenue for hotels, airlines, restaurants, and other players in the travel ecosystem.
- Healthy consumer spending: Amid low inflation and low unemployment, the US economy seems poised to sustain 2 to 2.5 percent growth through 2018.2 Consumers are at the heart of that growth. Incomes are rising, along with home values and stocks. That points to more income and more confidence to spend it.
- Intense airline competition: Downward pricing pressures are at play thanks to a mix of low fuel prices, international competition, and low-cost entrants. That may be tough news for airline industry margins, but low fares drive spending throughout the travel sector.
- Healthy corporate travel demand: Strong economies drive business activity. Business travel is projected to grow by more than 6 percent.3
- From products to experiences: Travel is outpacing the demand for goods. Spending on recreation, travel, and eating out is up, while spending on many durable goods and staples like clothing is down.4
As always, success isn’t guaranteed in 2018. Each of the travel segments have unique hurdles to overcome, but driving innovation and exploring new possibilities around the travel experience are some of the challenges that transcend the sectors.
Segment by segment: The view ahead
The hotel industry continues a run of strong performance and is projected to sustain strong 5–6 percent growth throughout 2018.5 Some analysts are concerned as this industry is usually cyclic, but optimists seem to outnumber pessimists. Throughout the year, hoteliers will be looking for an opportunity in strategic places, including a revisit of the midscale experience, traveler-facing tech, health and wellness, and loyalty.
After a decade of underwhelming performance, large US carriers are turning things around, and now look to define the future of flying with key infrastructure and technology investments. The key themes for 2018 center around low-cost cost competition, air traffic reform, cabin segmentation, and leveraging maturing technology such as Internet of Things (IoT) to redefine the curb-to-gate-to-plane experience.
Americans now spend 44 percent of their food budgets eating out instead of cooking in.6 That volume represents prosperity, the family time crunch, and the growth in service levels and delivery options. To seize their share of that growing pie, restaurants need to focus on key strategic imperatives, including embracing the experience, driving employee engagement, dominating delivery, competing with non-traditional players, and driving operational excellence and compliance.
Take a deeper dive into each segment.
Building bigger ecosystems: Unlocking the power of adjacent spaces
While hotels and airlines represent the bulk of industry gross bookings, most travelers do not take trips to sit on airplanes and spend time in hotel rooms. Whether they want to unwind on an exotic beach, try new cuisines, or explore ancient ruins—travel is all about the experience.
Today’s biggest travel suppliers can benefit from thinking outside the box, and find ways to be more relevant to their customers across their travel journeys. For many, this means looking outside their core competencies like flights and hotels, and exploring the power of adjacent spaces.
Opportunities around health and wellness, local activities, and retail will be key in 2018.