Most Travel Spending Is Close to Home, Despite ‘Revenge Travel’ Boom

Skift Take

Travelers may be catching up on international trips, but the pandemic set a precedent for exploring close by.

Elizabeth Casolo

Despite some record-breaking numbers for international travel, most travel spending still stems from domestic trips. Tourism within regions is growing, too.

A McKinsey & Company report released this week breaks down global tourism and hospitality trends. McKinsey estimated domestic travel spending will reach $6 billion in 2030, followed by the $1.7 billion estimated for travel within a particular region.

“Revenge travel,” with tourists going abroad after the pandemic lockdowns, sounds popular. Still, roughly three-quarters of travel spending in 2023 came from domestic trips. McKinsey predicted that, by 2030, domestic trips will match prepandemic proportions of travel spending. 

“The pandemic also created an opportunity for people to really explore what’s in their backyard,” said McKinsey Associate Partner Jasperina de Vries, who specializes in travel and contributed to the report.

While the pandemic was one driving force behind closer travel, sustainability could be another factor.

“People say that sustainability is important — and not necessarily do [it] — but, at the same time, we see that awareness is growing, and travelers are starting to act on it,” de Vries said. “We, for example, learned that 20% of travelers are actually reporting cutting down on travel in the last year in an effort to be more sustainable. So, all in all, I think these trends combined are driving a significant increase in nearby travel.”

The U.S. has the biggest domestic travel market, followed by China.

“Now the borders have opened up and international travel is much easier, but I think the habit of consuming travel experiences domestically is a trend that’s here to stay,” said Kuok Hui Kwong, chair of hotel company Shangri-La, on luxury travelers in the report.

Emerging Source Markets

While still relatively small, the Indian, Southeast Asian, and Eastern European source markets are growing rapidly. New tourists from countries with increasing GDP and spending power fuel this boost.

“We see a high correlation between GDP development and the development of outbound travel spend,” de Vries said.

McKinsey projected India will have annual travel spending growth of 9% ahead of 2030. The country’s travel brands — like IndiGo — are racing to meet this demand by bolstering their portfolios. International companies are also joining in.

Within India, the country is looking beyond its busiest areas to carry capacity. 

“Development focus has shifted away from major metropolises such as Mumbai and Delhi and toward fast-developing, smaller cities such as Chandigarh and Hyderabad,” the report said.

The Eastern European and Southeast Asian markets’ travel spending are each predicted to grow by 7% per year until 2030. With reciprocal visa waivers, China is hoping to cash in on the increase of Southeast Asian tourists.

Room for Alternative Accommodations

Compared to Western European travelers, South Asians — such as those from India — spend 20% less. Southeast Asians — like those from Cambodia and the Philippines — spend 55% less than Western Europeans. With just 3% of Asian hotel construction aimed at travelers with smaller budgets, it doesn’t look like upcoming hotels are meeting the demand for affordable accommodations.

“There might be indeed a potential supply gap,” de Vries said.

Another potential gap is at the opposite end of the spectrum. Luxury travelers lean toward traditional trips, with 63% planning a warm, beach-type vacation in 2024. But only 20% of luxury lodging units cater to these experiences.

“There’s actually a potential higher-than-expected demand for the more traditional trips,” de Vries continued.

Keeping Data and AI Simple

Hospitality players are still navigating how data and AI can boost the traveler experience. 

“Cutting-edge data strategies are not always necessary to get started,” de Vries said. She added some clients leverage look-alike analysis to identify travelers with shared characteristics. From there, you can “nudge” customers into certain behaviors based on their traits. For example, a company could compare travelers who book directly to those who don’t.

“​​This is one way to actually pivot the thinking to not just build out full personalization strategies with comprehensive sets of use cases, but, instead, you can be quite surgical,” said de Vries.

As AI — and especially generative AI — becomes more widespread, de Vries said travel companies have relied on it for internal data tools and content creation. AI’s potential goes beyond these applications, though, helping tailor travel experiences.

“It will continue to make a difference in terms of providing that human touch and personalized experience that is so incredibly important here, more so than in any other industry,” she said.