Why tourism is moving to a cheaper, greener, smarter model

In today's tourist industry, buzzwords such as ‘experience’, ‘sustainability’ and ‘affordability’ abound. The latest generation of travellers is hungry for seamless, authentic, eco-friendly and affordable holidays. To meet this demand, investors and city authorities are having to futureproof planning, especially as the sector continues to enjoy tremendous growth globally.

The number of international tourist arrivals has risen sharply and consistently since 2009, reaching 1.34 billion people in 2017, according to the UN’s World Tourism Organization. Meanwhile, travel and tourism is one of the world's largest economic sectors, creating one in 10 jobs (319 million) worldwide and producing 10.4% of world GDP – $2300bn in 2016, for example – according to the World Travel & Tourism Council (WTTC).

No substitute for experiences

Today's holidaymakers, especially millennials, are increasingly expressing a preference not to feel like tourists, and instead are wanting to be immersed in a new culture. “Travellers are increasingly looking to connect more deeply with the places they are visiting and with the people who live in the communities they visit. [There’s a] demand for new or unique things to do. Increasingly, people around the world are valuing experiences over consumer goods and products,” says Joe Zadeh, vice-president and head of Airbnb Experiences.

Global spending on the so-called ‘experience economy’, driven primarily by millennial consumers, is expected to reach a total of $8200bn in the 10 years to 2028, according to market research firm Euromonitor. Airbnb Experiences is capitalising on this lucrative market, providing activities for visitors led by locals, such as cooking pasta with an Italian grandmother in Rome.

Airbnb Experiences has seen impressive growth, and now boasts more than 30,000 'Experience' listings available in more than 1000 cities globally since launching in 2016, according to Mr Zadeh. In 2018, the number of seats booked on Airbnb Experiences increased nearly sevenfold year on year.

Sustainably minded

Travellers are also beginning to demand much higher standards of environmental sustainability as well as eco-tourism offerings. “There are evermore people asking questions about sustainability. It’s more than just having your towels not washed every day; they want to see changes. So you’re seeing companies giving tours about how waste is being processed, and where their water supply is coming from, tours of the local energy plant,” says Rochelle Turner, head of research at the WTTC.

Airbnb is catering to this demand through its social impact experiences, including the chance to hike with rescue dogs in California or go plastic fishing in Amsterdam's canals. “[We’re seeing] that travellers are becoming increasingly civic-minded and want to take action around causes that they care about, both at home and abroad,” says Mr Zadeh.

Meanwhile, Ms Turner describes how on one eco-holiday she “stayed in a hut that didn't have any power – it was all off-grid and made from local materials – and the food I ate was grown in the local garden”.

Sustainability has been on the agenda of international hotel chain Hilton for many years. Patrick Fitzgibbon, senior vice-president for development, Europe, the Middle East and Africa, at Hilton, says: “Long before you open a hotel, it's about the kind of materials you're using to build; how efficiently are we building hotels so we can minimise the energy and money to run them? Customers are looking for sustainability. [Millennials] might not go somewhere if it doesn't have eco-credentials.” 

Smaller hotels, such as those run by Room Mate, are equally conscious of sustainability. The company claims to be the first hotel chain to have all uniforms made from 100% recycled materials. All of its bottles are made from recycled plastic bought from a non-profit organisation making wells in Africa, and Room Mate aims to be plastic-free by 2020. It is also creating solar energy fields for some of its buildings.

Jumping the queues

As global tourist arrivals increase, cities and travel terminals are becoming busier and more congested, creating a need for solutions around this. “In terms of experience, people don’t want to be queuing in airports, they want a seamless journey. Therefore, the experience is now starting earlier [through] the technology that is [enabling] a seamless journey to help make that experience enjoyable from end to end,” says Ms Turner.  

For example, border controls in the US are beginning to use facial recognition and biometric technology to speed up the security process. Thus far, 15 million passengers have used the biometric facial comparison system successfully, with a 98% match rate taking no more than a second, according to Kevin McAleenan, commissioner of the US government's Customs and Border Protection law enforcement agency.

Biometrics also enable cruise company Royal Caribbean to clear a ship far more quickly, which can give people an extra day of vacation time, according to the WTTC. Meanwhile, Airbus A380 planes in Los Angeles airport can board people twice as quickly when using biometric check-in technology: 400 passengers in 20 minutes.

The most important thing that governments can do is to make it easier for travellers to travel, according to Hilton's Mr Fitzgibbon, who cites east Africa’s introduction of an electronic visa system as a positive example.

However, thanks to e-commerce, the travel experience is beginning long before people reach border controls. Continuing the digital experience, especially in payments, after crossing border control is another element in seamless travel.  

“A lot of people still go to destinations and use physical cash [and lots is being] wasted. When people go and travel, about 45% (or $800) of their total expense is cash, on average. However, when they come home, an average of $120 is not spent,” says Suzan Kereere, global head of merchant sales and acquiring at Visa. “If you take the 1 billion people who travel annually, and multiply that by 120, its roughly $160bn in unspent money that could change countries’ GDPs if we could digitise currency more.”   

As economies becoming increasingly interconnected, countries that provide travellers that enjoy a tap-and-pay system in their home country with the same payment method, should find themselves at an advantage. Digital payments also give local businesses useful data on customers’ diverse consumer habits.  

Planned to expand

As with digital payments, the more forward thinking national and city authorities are employing a strategic vision to attract and sustain tourism and investment. But have destinations planned for future growth?

“Is there a plan to avoid congestion [while promoting growth] through the right infrastructure, hotel supply, community policies, [business space], etc? [If not], that deters tourism investors [who are building for the long term]... and the visitors’ and locals’ experience is deteriorated. Ratings around experience have become more important than the volume of tourists,” says Mark Wynne-Smith, global chief executive of hotels and hospitality at real estate services firm JLL.

Indeed, some major tourist hubs are suffering from significant overcrowding and poor management of labour. In London, for example, locations where workers can afford to live are too far from the hotels they work in, according to the WTTC's Ms Turner.

“Barcelona cannot accept 10 cruise ships every day – they won't fit. They have to control the fluidity and flow. You have to think about where and how the city wants or needs to grow. There’s nothing worse than having a tourist coming into a city and have a bad experience,” says Kike Sarasola, co-founder of Room Mate.

He says 'tourism phobia' has led many governments to implement misguided laws for rental apartments, and this is a worldwide phenomenon. For example, to acquire a rental licence in Madrid, the city's anti-Airbnb laws require apartments to have their own building entrance.

Globally, investors are also struggling with city bureaucracy, especially regarding planning permission. “It doesn't matter where you are in the world, planning processes are just too cumbersome. When you’re running a hotel, it is a 30-year or more investment, and it is taking an awful long time to get the planning in place,” says Mr Fitzgibbon.

Mr Sarasola says: “We find that in every country Room Mate has invested in, bureaucracy has become worse. There is no country where we’d say it’s been so easy, except the US.” 

Affordable luxury

Among investors, there is a growing trend towards the construction of more affordable accommodation that can appeal to families, younger travellers or the thrifty.  

Room Mate was one of the first European, now global, hotel chains to tap this space in the market. “We felt there was no in-between: things were either luxury or crummy. So we created a ‘boutique-affordable-luxury bed and breakfast’ in very good, central locations,” says Mr Sarasola.

“I think investors should still be looking at this space. Look at our expansion plan. We’re seeing so many opportunities – it’s a very sweet moment. We find in our hotels that people are interacting much more. We are growing our lobby space to make [it a] more social experience,” he adds.

Increased sociability among travellers is reflected by the international growth of hospitality brand Selina, which provides guests with traditional amenities such as bars, pools and communal kitchens, as well as co-working spaces and coffee stations. The company’s mission is to “inspire meaningful, authentic connections between people”.

Like Room Mate, Hilton is also enjoying rapid growth in its mid-market and focused service range, Hampton and Garden Inn, which provide fewer add-ons for a more cost-conscious and regional traveller, according to Mr Fitzgibbon. Such hotels are cheaper and faster to build, he adds.

Hampton is growing rapidly across Europe, and that relies on it being in integrated locations close to local services, such as food and entertainment, continues Mr Fitzgibbon. Like Room Mate’s centrally located hotels, Hampton taps into travellers' growing desire for a more immersive and social experience.