The travel & tourism industry has experienced incredible growth in recent decades. According to GlobalData, international departures increased from 911.85 million in 2009 to 1.47 billion in 2019. With travel recovering from the virtual standstill caused by the Covid-19 pandemic, GlobalData now forecasts that annual international departures will rise to 1.59 billion by 2028.
Several key forces will contribute to the industry’s expansion over the next 12 months. Economic uncertainty will continue to boost the popularity of low-cost airlines and accommodation, while moneyed tourists will drive a demand for premiumization. Additionally, travel apps and platforms give consumers the power to plan trips from their pocket. Artificial intelligence (AI) and big data are further set to improve personalization experiences, as tourists increasingly expect these to be recommended in line with their preferences. Hospitality businesses will need to stay abreast of these trends if they want to remain successful in 2025 and beyond.
The low-cost evolution
Ongoing economic certainty will fuel further demand for low-cost travel this year. Budget airlines and affordable accommodation options, such as cheap hotels and hostels, have made travel more accessible than ever. By offering a no-frills service to keep costs low, companies such as Ryanair and Motel 6 have created compelling propositions that appeal to younger travelers, students, and middle-income families.
Online travel agents (OTAs) such as Booking.com and TripAdvisor have further democratized the booking experience, helping travelers find the best value for their money by comparing a wealth of available options. GlobalData’s Q4 2024 Consumer Survey found that just under half of travelers used an OTA or price comparison website the last time they booked a holiday; in-store face-to-face bookings, by contrast, were used by just 14% of respondents. Budget firms are keen to pay the commission on these sites in return for greater visibility.
However, the low-cost evolution of travel poses challenges for operators. Budget firms run on thin margins, and concerns have also been raised over the sustainability of low-cost trips. The rising volume of cheap but carbon-heavy flights, and the ever-increasing volumes of travelers in popular areas, has sparked debate on the environmental impacts of over-tourism. Looking to the future, industry players will need to balance consumers’ price expectations with growing demands for sustainable business practices.
Premiumization
It might seem contradictory that premium travel is rising in popularity alongside budget breaks. However, the two trends operate in a symbiotic relationship: low-cost operators expand the market to first-time or infrequent travelers, who later transition to premium offerings. Moreover, the coexistence of the two trends allows businesses to diversify revenue streams. Budget airlines, for example, integrate elements of premiumization by offering add-ons such as extra legroom or priority boarding.
Affluent travelers are driving the demand for premium, high-quality travel experiences. These customers are willing to pay more for exclusive services, privacy, and comfort, from bespoke tours to first-class cabins and wellness retreats. And travelers sharing their experiences online has broadened the appeal of luxury travel further; social media users increasingly seek to adopt aspects of aspirational lifestyles touted by travel influencers.
Research from GlobalData found that the occupancy rate of luxury hotels globally increased on average by 14% from 2022 to 2023. However, hospitality businesses in the premium space need to stay agile to retain the spoils of this growth. As with budget firms, sustainability concerns are challenging traditional definitions of luxury as consumers increasingly value ethical and environmentally friendly operators as “premium”. Additionally, while premium travel goes hand-in-hand with higher margins, businesses should be wary of pushing prices too high lest they alienate valuable mid-market consumers and limit their customer base.
Online travel and travel apps
Travel platforms and apps exemplify how technological advancements and user-centric design have redefined the travel experience. OTAs operate as aggregators, offering centralized access to hotels, flights, car rentals and travel insurance. By putting convenience first, consumers can plan and book their whole trip on one platform, all while comparing price and location.
Online travel platforms have become more sophisticated still when enhanced by AI, which provide users with personalized recommendations based on their activity and previous bookings. Meanwhile, travel apps can simultaneously provide a complimentary, mobile-centric experience that can help travellers on their journeys with real-time alerts and recommendations. For example, Expedia and Booking.com have invested heavily in mobile app versions of their websites to provide consumers with more convenience and the capability of planning their trip from the device in their pocket.
Emphasizing immediacy and accessibility, apps such as Airbnb and Expedia are integrated with GPS and other smartphone capabilities to provide recommendations based on user location and preference.
Personalization
The digitization of travel goes hand in hand with the growing emphasis on personalization. The ubiquity of data analytics and AI algorithms mean consumers now expect products to be personalized to their preferences. And travel companies can tap into a wealth of data to make their offerings more personalized. Location and contact information, website browsing history and social media activity can all be used to develop detailed customer profiles. Products and services can then be tailored specifically to users to improve their experiences and optimize sales. Companies that can recommend ever more relevant travel experiences are most likely to drive brand loyalty and repeat business.
In light of data privacy regulations such as the EU’s General Data Protection Regulation (GDPR), travel and tourism businesses need to walk a delicate line between leveraging data and respecting customer privacy. Automation must also be implemented carefully to ensure that recommendations do not become generic or poorly contextualized. As AI adoption ramps up across all verticals, in 2025 the industry will need to think of ways to use technology to its best advantage—rather than follow the herd.
Discover further insights
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