We’re heading towards the end of the summer here in the UK and we thought it would be a good time to take the temperature of the holiday market with a four-part series exploring how our travel patterns are changing - and what this might mean for hotel investors. You can catch up on the story so far here.
Travel might be a common passion across the generations but quite what the different cohorts are looking for, their spending patterns – and disposable income – is becoming increasingly different.It is also changing, depending on their debt situation, rent or mortgage increases, cost of living impact and responsibilities, meaning that spending behaviour, priorities and where they want to visit and what type of accommodation are also in flux.
As we approach the end summer holiday season, we look at how four key generations are typically spending their travel budget.
Gen Z (born late 1990s and early 2010s): Adventurous Yet Budget-Conscious
Characterised by tech-savviness and their desire for authentic experiences, many Gen Z travellers are students or recent graduates, or relatively new to the workplace, making budget-conscious choices a significant aspect of their travel spending.That means hostel stays, budget airlines and shared accommodation platforms like Airbnb are popular options, enabling them to stretch their limited budgets while exploring Europe.
However, Gen Z also tends to spend generously on unique experiences like street food tours, local art workshops, and adventure activities, with social media a driving force in their travel decisions.According to American Express Travel’s 2023 Global Travel Trends Report, 79% of Gen Z and Millennial respondents see leisure travel as an important budget priority and 84% would rather take a dream holiday than purchase a new luxury item. In addition, 70% of Gen Z and millennial respondents said that they have been inspired to visit a destination after seeing it featured in a TV series, news source or movie.
“The generation’s enthusiasm for long distances for extended periods of time, means that the industry can no longer ignore this important group of consumers. Combined with demographic factors, these motivators shape Gen Z travellers’ attitudes and expectations — they expect travel to be accessible and inclusive to all people, not just the highest-earning, most privileged consumers,” says Morning Consult lead travel and hospitality analyst Lindsey Roeschke.
She adds that brands that can successfully engage Gen Z now will set themselves up for long-term success.
Millennials (born early 1980s to mid-1990s): The Experience-Seeking Wanderers
Most Millennials have already established themselves in the workforce, giving them more disposable income compared with Gen Z. They are known for their passion for experiences over material possessions, which extends to their travel preferences in Europe.Millennials are willing to spend more on immersive experiences, such as food tours, local wine tastings, and attending music festivals or cultural events.
While they appreciate authenticity, many are also open to spending on luxury accommodations and unique boutique hotels with character and charm. Sustainable and eco-friendly travel options are crucial considerations for many Millennial travellers, who are willing to pay extra for eco-conscious accommodations and transportation.
Millennials are the current darlings of the travel industry, as they travel more often than any other group, edging out the far wealthier baby boomer generation, according to Morning Consult.
“When it comes to nearly all travel behaviours, millennials are the generation most likely to engage — and they do so often,” says Morning Consult’s Lindsey Roeschke.
Despite feeling the cost of living squeeze, they still value “the idea of vacationing over adding a few more dollars to their savings,” according to a report from GWI Travel, which adds they are “way out in front of other generations” in deeming vacations to be very or extremely important to them.
Gen X (born mid-1960s to early 1980s): Indulgent and Unique
Gen X represents a unique group of travellers with distinct preferences and spending patterns. Currently in their 40s and 50s, many Gen Xers are at a stage in life where they have established careers and financial stability, enabling them to indulge in travel.
Gen X travellers often prioritise comfort and convenience when it comes to accommodation. They are more likely to splurge on well-appointed hotels, boutique stays or vacation rentals that offer a relaxing and upscale experience.
They are willing to spend on fine dining at renowned restaurants, food tours that explore local cuisine, and wine tastings, plus meaningful experiences that allow them to connect with the local culture. They invest in guided tours, historical site visits and culture.
On average, Gen X take an average of 26 vacation days a year, compared with 29 days for Gen Z and 35 days for millennials, according to the UK’s CBI. However, recent research suggests that each trip this generation takes is longer on average than trips taken by younger generations. Almost half of Gen Xers take holidays of longer than seven days at a time and also spend more money when travelling than other generations, largely because of travelling in larger (often family) groups, which also makes them a valuable target group.
However, recent research by Expedia and Publicis Sapient says that Gen X travellers have been impacted by the cost of living squeeze and they are budget-conscious, with money a very important aspect of selecting a destination.Therefore, developing and promoting products that offer value for money is essential, with 64% saying that budget is a key consideration when booking trips, 86% looking for deals and promotions and 81% saying getting value for money was critically important in travel planning.
Baby Boomers (born mid-1940s and mid-1960s): The Comfort-Seeking Explorers
Baby boomers have witnessed significant changes in travel trends throughout their lives. Many are now retired or nearing retirement, allowing them more time to explore Europe extensively. Comfort and convenience are significant factors in their travel decisions.Baby boomers are willing to spend on premium travel experiences, such as luxury cruises, all-inclusive tours, and upscale accommodation. They prefer guided tours to explore historical and cultural sites in-depth, often opting for packages that cater to their interests and needs and this group is the least impacted by rising debt costs as they are largely retired.
However, one trend has emerged post-pandemic, with gap years no longer the preserve of the young, as nearly four in ten (37%) baby boomers have decided to book a major trip, including cruises (38%), city breaks (43%), beach holidays (40%) and luxury trips (37%) according to research released late last year by Norwegian Cruise Line (NCL).Eamonn Ferrin, VP International Business at NCL, adds of the research: "While globetrotting has long been associated with the young and carefree, our research suggests more baby boomers are travelling than ever before."
What It Means For Travel
As summer 2023 comes to an end, the travel industry consensus is that the sector is getting close to pre-pandemic levels, and that all generations are continuing to travel. There is caution over the ongoing impact on summer 2024 if costs and inflation remain high, which means targeted market segmentation by generational groups is going to become increasingly important.
The younger and older generations may remain more immune to the impact of, especially, higher mortgage rates as they are either not on the property ladder or have finished paying of their homes, while Gen X and some Millennials could yet feel the squeeze hardest, with Gen X already the group most seeking value.