19 June 2019
The €8 trillion travel and tourism industry, which grew by 3.8% last year, is poised for sustained expansion – driven by rapid growth in the Asia-Pacific region and higher retirement-age travel spending.
That is the view of Jean-François Jacquet, Chief Investment Officer at KBL Luxembourg, which today released a special summer edition of its Midyear Investment Perspectives.
“Travel and tourism is one of the world’s largest industries, accounting for 10% of global employment,” Jacquet said. “Today, industry growth is primarily coming from the East, particularly China, which is now the world’s largest outbound tourism market as measured by both trips and visitor spending.”
Chinese tourists currently take more than 4 billion domestic leisure journeys annually, he noted. As they continue to become richer and face fewer visa restrictions, they are also traveling abroad in greater numbers than ever before – with some 150 million outbound trips expected this year, up from 57 million in 2010, and related spending anticipated to approach €270 billion.
“Instead of a whirlwind tour of iconic landmarks – with five minutes to snap a selfie – today’s Chinese travelers are more likely to stop and stay longer,” he said. “That is especially true of the younger generation, who are increasingly keen to cover their expenses via mobile phone payment platforms like WeChat and Alipay.”
Meanwhile, another ongoing shift in worldwide travel and tourism is demographic, rather than geographic.
“As global life expectancy inexorably rises – up 5.5 years between 2000-2016 alone – the number of retirement-age travelers is rising with it,” said Jacquet. “Over the next 35 years, the number of people above the age of 85 will triple. An ever-increasing percentage of them will have the time, means and ability to travel well into their twilight years.”
In Germany, for example, roughly two-thirds of the population traveled for leisure last year, the highest percentage ever. Growth there was driven by those above the age of 55, and especially those aged between 65-74, according to Jacquet.
“The same trend is mirrored in developed countries worldwide, where this increasingly mobile ‘grey market’ will account for an ever-larger percentage of travel and tourism spending. And what’s true for that industry is true for others, too – including retail, dining and even fitness.”
Despite many positive indicators, the global tourism industry faces numerous challenges, including greater sensitivity to the environmental impact of all that increased travel, especially by air, explained Ilario Attasi, Head of Group Research at KBL European Private Bankers, parent of KBL Luxembourg.
“The rise of budget airlines has reshaped international tourism, creating new demand by offering low-priced supply,” Attasi said. “In parallel, passengers have benefitted from more efficient and transparent pricing – through online comparison shopping – leading to lower costs on just about every airline.”
Partly as a consequence, tourism now accounts for fully one-tenth of the world’s total greenhouse gas emissions, more than international trade.
“As consumers become increasingly conscious of their own environmental impact and multilateral climate commitments such as the Paris Accord come into force,” said Attasi, “airlines should brace themselves for some serious potential changes, especially when it comes to how they are taxed.”
The outlook for global travel and tourism is explored in greater depth in KBL Luxembourg’s 2019 Midyear Investment Perspectives, which includes an overview of how the burgeoning trade war between the United States and China may take its toll on worldwide growth.
Additional topics include how cities are getting smarter about managing increased strains on urban infrastructure, why green bonds can generate solid long-term returns and make a measurably positive impact on the planet we all share, what the introduction of 5G technology will mean for consumers, and why the future of food may be more high tech than haute cuisine.