McKinseyCompanyTravel,Logistics&Infrastructure PracticeThe state oftourism andhospitality 2024Caroline TufftMargaux ConstantinMatteo PaccaRyan MannIvan GladstoneJasperina de VriesMay 2024Copyright 2024 McKinsey Company.All rights reserved.All interiorimages Getty Images.ContentsExecutive summary 2Chapter 3:Updating perceptionsDestination readiness index 50about today's luxury traveler 24Chapter 1:Now boarding:Some widely held notions aboutChapter 5:Six trends shapingFaces,places,andtrendsluxury travelers-such as how muchnew business models inshaping tourism in 2024 4money they have or how old theytourism and hospitality 52are-could be due for reexamination.Global travel is back and buzzing.Tourism and hospitality companiesMore regional trips,newly emerginghave transformed over the pasttravelers,and a fresh set of destinationsChapter 4:Destinationdecade.Here's a look at trendsrelatedare powering steady spendingreadiness:Preparing for theto accommodations and experiencestourist flows of tomorrow 38and an outlook on the future.Chapter 2:The way weAs global tourism grows,it's crucialtravel now 14for destinations to be ready.How canKey contributors andAsurvey of travelers reveals disparatethe tourism ecosystem prepare to hostacknowledgments63desires,generational divides,and anewlyunprecedented volumes of visitors-emerging set of traveler archetypes.while also managing the challenges?The state of tourism and hospitality 2024Executive summaryThe state oftourism andhospitality 2024Tourism and hospitality are setto soar,powered by new travelers,destinations,and trends.Tourism and hospitality are on a journey of disruption.Shiftingsource markets and destinations,growing demand for experientialand luxury travel,and innovative business strategies are allcombining to dramatically alter the industry landscape.Given thismomentous change,it's important for stakeholders to considerand strategize on four major themes:-The bulk of travel is close to home.Although international travelmight draw headlines,stakeholders shouldn't neglect thebig opportunities in their backyards.Domestic travel stillrepresents the bulk of travel spending,and intraregional tourismis on the rise.-Consumers increasingly prioritize travel-when it's on theirown terms.Interest in travel is booming,but travelers are nolonger content with a one-size-fits-all experience.Individualpersonalization might not always be practical,but savvy industryplayers can use segmentation and hypothesis-driven testingto improve their value propositions.Those that fail to articulatetarget customer segments and adapt their offerings accordinglyrisk getting left behind.-The face of luxury travel is changing.Demand for luxury tourismand hospitality is expected to grow faster than any other travelsegment today-particularly in Asia.It's crucial to understandthat luxury travelers don't make up a monolith.Segmenting byage,nationality,and net worth can reveal varied and evolvingpreferences and behaviors.-As tourism grows,destinations will need to prepare to mitigateovercrowding.Destinations need to be ready to handle the largetourist flows of tomorrow.Now is the time for stakeholders toplan,develop,and invest in mitigation strategies.Equipped withaccurate assessments of carrying capacities and enhancedabilities to gather and analyze data,destinations can improvetheir transportation and infrastructure,build tourism-readyworkforces,and preserve their natural and cultural heritages.The state of tourism and hospitality 2024Chapter1Now boarding:Faces,places,and trends shapingtourism in 2024Global travel is back and buzzing.More regional trips,newly emergingtravelers,and a fresh set of destinationsare powering steady spending.After falling by 75 percent in 2020,travel is on its way to a full recovery by the end of 2024.Domestic travel is expected to grow 3 percent annually and reach 19 billion lodging nightsper year by 2030.Over the same time frame,international travel should likewise ramp up toits historical average of nine billion nights.Spending on travel is expected to follow a similartrajectory,with an estimated $8.6 trillion in traveler outlays in 2024,representing roughly9 percent of this year's global GDP.There's no doubt people still love to travel and will continue to seek new experiences in newplaces.But where will travelers come from,and where will they go?We developed a snapshot ofcurrent traveler flows,along with estimates for growth through 2030.For the purposes of thisreport,we have divided the world into four regions-the Americas,Asia,Europe,and the MiddleEast and Africa.Our analysis identifies three major themes for industry stakeholders to consider:The bulk of travelspending is close to home.Stakeholders should ensure they capture thefull potential of domestic travel before shifting their focus to international travelers.And theyshould start with international travelers who visit nearby countries-as intraregional tripsrepresent the largest travel segment after domestic trips.Source markets are shifting.Although established source markets continue to anchor globaltravel,Eastern Europe,India,and Southeast Asia are all becoming fast-growing sources ofoutbound tourism.The destinations ofthe future may notbe the ones you imagine.Alongside enduringfavorites,places that weren't on many tourists'maps are finding clever ways to lureinternational travelers and establish themselves as desirable destinations.The bulk of travel spending is close to homeInternational travel might feel more glamorous,but tourism players should not forget thatdomestic travel still represents the bulk of the market,accounting for 75 percent of globaltravel spending(Exhibit 1).Domestic travel recovered from the COVID-19 pandemic faster thaninternational travel,as is typical coming out of downturns.And although there has been a recentboom in"revenge travel,"with travelers prioritizing international trips that were delayed by thepandemic,a return to prepandemic norms,in which domestic travel represents 70 percent ofspending,is expected by 2030.The United States is the world's largest domestic travel market at $1trillion in annual spending.Sixty-eight percent of all trips that start in the United States remain within its borders.Domesticdemand has softened slightly,as American travelers return abroad.2 But tourism players with theright offerings are still thriving:five national parks broke attendance records in 2023(includingUnless otherwise noted,the source for all data and projections is Oxford Economics.2 Dawit Habtemariam,DomesticU.S.tourismgrowth levels offas Americans head overseas,"Skift,August 18,2023The state of tourism and hospitality 20245Exhibit1Domestic travel still represents the bulk of the travel market,even asintraregional and interregional travel ramp up growth.Global outbound lodging nights,by source,Global outbound travel spending,by source,billionsbillion'38.78.60.9Interregional73Interregional17Intraregional2744.5Intraregional5.50.509686.0Domestic19.8Domestic16.14.12023203020232030projectedprojectedJoshua Tree National Park,which capitalized on growing interest fromstargazers indulging in"dark sky"tourism).China's $744 billion domestic travel market is currently the world's second largest.Chinesetravelers spent the pandemic learning to appreciate the diversity of experiences on offer withintheir own country.Even as borders open back up,Chinese travelers are staying close to home.And domestic destinations are benefiting:for example,Changchun(home to the ChangchunIce and Snow Festival)realized160 percent year-on-year growth in visitors in 2023.In 2024,domestic travel during Lunar New Year exceeded prepandemic levels by 19 percent.China's domestic travel market is expected to grow 12 percent annually and overtake the UnitedStates'to become the world's largest by2030.Hotel construction reflects this expectation:30 percent of the global hotel construction pipeline is currently concentrated in China.Thepipeline is heavily skewed toward luxury properties,with more than twice as many luxury hotelsunder construction in China as in the United States.India,currently the world's sixth-largest domestictravel market by spending,is another thrivingarea for domestic travel.With the subcontinent's growing middle class powering travel spendingaScott McConkey,national parks set attendance records in2023,andthe reasonsmaysurprise you,Wealth of Geeks,Apd16,20244Shi Xiaoji,"Why don't Chinese people like to travel abroad anymore?The global tourism industry has lost 900 billion yuan.What is the situation?,"Net Ease,February 12,2024.The state of tourism and hospitality 2024growth of roughly 9 percent per year,India's domestic market could overtake Japan's andMexico's to become the world's fourth largest by 2030.Domestic air passenger traffic in Indiais projected to double by 2030,5 boosted in part by astate-subsidized initiative that aimstoconnect underserved domestic airports.8When travelers do go abroad,they often stay close to home (Exhibit 2).Europe and Asia,in particular,demonstrate strong and growing intraregional travel markets.Recognizingthis general trend,stakeholders have been funneling investment toward regional tourismdestinations.An Emirati wealth fund,for instance,has announced its intent to invest roughly$35billion into established hospitality properties and developmentopportunities in Egypt?Europe has long played host to a high share of intraregional travel.Seventy percent of itstravelers'international trips stay within the region.Europe's most popular destinationsfor intraregional travelers are perennial warm-weather favorites-Spain(18 percent),Italy(10 percent),and France(8 percent)-with limited change to these preferences expectedbetween now and 2030.Despite longer travel distances between Asian countries,Asia's intraregional travel market isbeginning to resemble Europe's.Intraregional travel currently accounts for about 60 percentof international trips in Asia-a share expected to climb to 64 percent by 2030.As in EuropeExhibit2Intraregional travel is the second-largest opportunity,after domestic travel,and is growing.Source of travel by region,1%of incoming travel■Domestic■Intraregional■Interregional20232030 projectedGlobal75970AmericasNorth America578579Central America6259402Caribbean8580137South America79156EuropeWestern Europe582913535Emerging Europe57349464410Africa andNorth Africa69671419Middle EastSub-Saharan Africa76721414Middle East443620393625AsiaNortheast Asia85126South Asia801383Southeast Asia24630Oceania1218Note Intert aresMurali Krishnan,Can India'sairports cope with rapid passengergrowth?,"DeutscheWelle,February 7,20246 "India is seeing a massive aviation boom,"Economist,November 23,2023.7 Mirette Magdy,UAE's$35 billion Egypt deal marks Gulf powers'buyingspree,"Bloomberg.Aprl ,2024.The state of tourism and hospitality 20247in past decades,Asian intraregional travel is benefiting from diminishing visa barriers and thedevelopment of a low-cost,regional flight network.Thailand is projected to enjoy continued,growing popularity with Asian travelers.Thailand waivedvisa requirements for Chinese tourists in 2023 and plans to do the same for Indian tourists startingin 2024.It has aggressively targeted the fast-growing Indian traveler segment,launching more than50 marketing campaigns directed at Indians over the past decade.The investment may be payingoff:Bangkok recently overtook Dubai as the most popular city destination for Indian tourists.3A McKinsey ConsumerWise survey on consumer sentiment,conducted in February 2024,suggests that Chinese travelers are also exhibiting high interest in international travel,with36 percent of survey respondents indicating that they intend to spend more on internationaltravel in the next three months.Much of this interest is directed toward regional destinationssuch as Southeast Asia and Japan,with interest in travel to Europe down from previous years.oGiven travelers'preference for proximity,how can tourism stakeholders further capitalize ondomestic and intraregional travel demand?Here are a few strategies:Craft offerings thatencourage domestic tourists to rediscover local gems.Destinations,hotels,and transportation providers can encourage domestic tourists to integrate lesser-known cultural landmarks into their trips to visit friendsand relatives.In France,the upscalehotel chain Relais Chateaux markets historic properties that lie far fromclassic touristsights-such as Chateau Saint-Jean in rural Auvergne-as awelcome escape from the bustleof Paris.In Mexico,the Pueblos Magicos program has successfully boosted domestic touristvisits to a set of"magical towns"that showcase Mexican heritage.Fold one-offdomestic destinations into fuller itineraries.Route 66 in the United States isa classic road trip pathway,which spurs visits to attractions all along the highway's length.Tourism stakeholders can collaborate to create similar types of domesticitineraries aroundthe world.For instance,Mexico has expanded on its Pueblos Magicos concept by brandingcoordinated visits to multiple villages as"magical routes."In France,local tourism boards andvineyards have collaborated to promote bucket list"wine routes"around the country.Make crossing borders into neighboring countries seamless.Removing logistical barriersto travel can nudge tourists to upgrade a one-off trip to a single attraction into a bucketlist journey across multiple,less-trodden destinations.In Africa,for example,EthiopianAirlines is facilitating cross-border travel to major regional tourist sites through improvedair connectivity.In Asia,Thailand has announced its intent to create ajoint visa easing travelamong Cambodia,Laos,Malaysia,Myanmar,Thailand,and Vietnam.Source markets are shiftingThe United States,Germany,the United Kingdom,China,and France remain the world's fivelargest sources of travelers,in that order.These countries collectively accounted for 38 percentof international travel spending in 2023 and are expected to remain the top five source marketsthrough 2030.But interest in travel is blossoming in other parts of the world-causing a shift inthe balance of outbound travel flows(Exhibit 3).North Americans'travel spending is projected to hold steady at roughly 3 percent annual growth.US consumers voice growing concerns about inflation,and the most cost-constrained travelersegments are reducing travel,which is affecting ultra-low-cost airlines and budget hotels.Most travelers,however,plan to continue traveling:McKinsey research suggests that Americanconsumers rank international and domestic travel as their highest-priority areas for discretionaryBangkok overtakes Dubai as top destination for Indians post visarelaxation,revealsAgoda,PRNewswire,January 18,2024.May9,2023.The state of tourism and hospitality 2024