NextGen travellers and destinations

Tourism, a key driver for social and economic growth worldwide, experienced an unprecedented slowdown with the arrival of COVID-19. However, the sector has shown extraordinary resilience, with a recovery that reached 88% in 2023 compared to pre-pandemic levels. Nevertheless, this resurgence presents a significant disparity between different regions of the world: while Europe, North America, and South America have achieved levels above the pre-pandemic situation, this improvement is notably affected by the stagnation experienced in the Asia-Pacific (APAC) region.

This is one of the conclusions drawn from the study "NextGen travellers and destinations: our vision on the tourism industry transformation", jointly developed by Google and Deloitte, which analyzes the evolution of the sector since 1990 and anticipates how it will continue to develop until 2040. The goal is to analyze the profiles of travellers and destination clusters to help travel operators and distributors transform, anticipating future trends.

The tourism sector, an economic engine of growth

The tourism sector experienced strong growth from 1975 to 2019, a period during which the number of international inbound arrivals worldwide roughly doubled every 15 years, reaching almost 1.5 billion travellers globally.

This growth contributes to the development of countries and generates numerous benefits:

• Economic growth: From 2011 to 2019, the pace of tourism growth (c.5%) exceeded that of the global economy (c.3%).
• Employment with social impact: Between 2016 and 2019, tourism generated one out of every ten jobs worldwide. In 2019, 54% of the jobs were occupied by women, 21% by minorities, and 15% by youth.
• Indirect economic impact: One out of every five new jobs came from tourism between 2014 and 2019. Its revenues have a multiplier effect on other sectors and generate wealth and employment throughout the economy.
• Modernization: The sector attracts infrastructure and direct foreign investment (CAGR c. 30% from 2015 - 2019), contributing to improving the country's development level and the life quality of its citizens.
• Social cohesion: In 2019, about 1.5 billion people (nearly 20% of the world's population) travelled around the world. The number grows every year, promoting cultural exchange, blurring borders, and generating a positive impact on mental health by offering new experiences and reducing stress.
• Commitment to sustainability: The sector generates 8% of the world's carbon emissions, which can also contribute to noise and overcrowding. However, the sector has an ambitious ESG agenda and is working with companies that have a solid roadmap to offset potential negative impacts, such as the Net Zero Roadmap initiative for 2050.

The evolution of travel: from 1990s to 2023

The study reveals that European countries are the main source markets. However, in the period between 2010 and 2019, Africa and APAC (Asia-Pacific) have exceeded the average growth (8% and 6.8% respectively, compared to the average of 4.8%), surpassing Europe (3.8%). In turn, the APAC region has generated about 215 million new outbound trips in the last ten years (43% of the total), positioning itself ahead of European countries. Likewise, China has grown to rank number 1 in the source market ranking in 2019, joining the leading group comprised of Germany, the United States, the United Kingdom, and Russia.

When analyzing the main source markets per middle-class inhabitant, the study identifies four different travel patterns based on origin: newcomers, amateurs, experienced, and super-experienced.

The experienced and super-experienced countries are those with the oldest population, with 50% of the inhabitants over 45 years old. In the group of newcomers, driven by China and India, and amateurs, which includes Russia, Japan, and Turkey, among others, 60% of the people are under 44 years old. In the period 2010-2019, newcomers have experienced the highest growth in outbound departures (c.11% CAGR 2010-2019), mainly due to the growth of their middle class (c.9% CAGR 2010-2019), which is reflected in an annual income per capita growth rate of 4.4%.

As tourists gain more experience, domestic trips per inhabitant tend to decrease in favor of travel abroad. For long-haul destinations, the periods for searching and preparing for the trip are longer due to their complexity and the higher length of stay. Regarding accommodation, hotels are the main preference for international trips, accounting for about 80% of travellers. For short and medium-haul trips, alternative accommodations, such as rentals, are gaining popularity among travellers' preferences (15%) compared to long-haul trips (12%).

The use of intermediaries when travelling abroad is high across all profiles (around 55%). This percentage has been decreasing among newcomer and amateur countries as travellers gain experience. For this reason, there is an increase in the online share and a growing trend to explore distant countries. Except for Australia, the amateur origins, which have more long-haul trips, have the highest average spending per departure, led by Turkey.

In the destination ranking, Europe leads, although in the period 2010-2019 it was surpassed in average growth by the APAC region and South America (4.2% compared to 6.7% and 5.2% respectively). Since 2010, the most visited countries (France, Spain, the United States, Italy, and China) have maintained their position and market share. However, APAC and Middle East countries are rising in the ranking, and those below the top 15 are gaining larger shares.

European cities lead the classification by search share (7 cities among the top 10), with short or medium-distance flights being the preferred means to visit them.

The future of source markets and destinations: 2040 vision

We are in the midst of an Economic, Social, and Technological transition that will lead to a new scenario in which transformation will be essential to ensure success in the future.

Despite the uncertainty surrounding the future evolution of these factors, which will decisively influence the development of the tourism sector, our vision for 2040 is based on predictive models that incorporate a set of variables selected for their ability to predict future movements and capture the complex dynamics of tourism demand and supply.

From the study, we can conclude that the future evolution of outbound departures globally will continue to be highly dependent on the middle-class population evolution. The analysis, which includes c.20 additional variables, estimates that by 2040, the number of trips will continue to increase, reaching 2.4 billion. Between 2019 and 2040, Africa and America will be the regions with the highest forecasted annual growth rate (4-5% CAGR).

The APAC region will capture the majority of incremental outbound departures between 2019 and 2040 (over 312 million, 33% of the total), followed by European countries (over 282 million, 30%). However, over the next 20 years, a fragmentation in market share capture is expected due to the growth of North America and the Middle East.

Due to an increase in travel frequency, the top five source markets (China, the United States, Germany, the United Kingdom, and Russia) will expand their market share to reach 42% of outbound departures (34% in 2019). On the other hand, Pakistan, Brazil, Saudi Arabia, Indonesia, and Mexico are expected to enter the top 15 countries with the highest growth in outbound departures, driven primarily by the rise of the middle class. Below the top fifteen source markets, European countries, APAC, and the United Arab Emirates (UAE) stand out as significant origins.

As for inbound arrivals, from 2019 to 2040, European countries will capture the largest share with over 362 million incremental tourists between 2019 and 2040 (38% of the total), followed by the APAC region, which will exceed 278 million incremental tourists (30%). From now to 2040, a greater segmentation in market share capture is observed, mainly because the Middle East and Africa are growing at a faster pace (3.5% - 5% CAGR).

By 2040, the top five destinations are likely to reduce their market share to 20%, compared to the 30% they had in 2019. Spain, France, the United States, and China will maintain their position in the top 5, while Italy will fall to sixth place, and Mexico will move up to fifth place. Saudi Arabia, Indonesia, and the UAE may enter the top 15, and below, European and APAC countries will continue to grow.

In the future, 45% of global travellers will concentrate in four key destination clusters: Mediterranean, Southeast Asia, Novel Middle East, and the Caribbean.