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Wanderlust or Bust: Debunking the myths of millennials’ influence on tourismBy Taylor Palmer

October 2016

Tourism highlights the contast between the media’s perceptions of millenials and the data describing the demographic’s influence.

Many Americans have blamed millenials for the demise of a number of industries

Lately, the term “millennial” has become a common topic of discussion, as has the influence of the demographic that it represents. But what exactly is a millennial? Pew Research Center labels any person born between 1981 and 1997 as a millennial. However, opinions on these qualifying age benchmarks differ from source to source, along with views on what constitutes the defining traits of the age demographic. However, one thing is for sure; as the group comprises nearly 76.0 million US consumers, according to Pew, it has become one of the most influential age cohort in terms of purchasing power. As a result, many Americans have recently pointed a finger at millennials, branding the group as the primary culprit in the demise of a number of industries in recent years. While critical media-based assessments of millennials are often quick to link certain industry deaths directly to this highly influential age group, many IBISWorld reports paint a different picture.

The tourism sector perfectly highlights the stark contrast between the media’s perceptions of millennials and the actual data describing the demographic’s influence. Fluctuations within the tourism sector can have a broad rippling effect, as businesses such as hotels, restaurants, shopping centers, car rental facilities and airports, among many others, are supported by tourism. Travelers spend their earned wages on various goods and services

provided by such businesses, which in turn supports those who work at these establishments, giving the employees the financial means to continue this trend and spend their own wages further downstream. Due to this multiplier effect, tourism has proved to be a fairly important part of the overall economy. However, while articles published by various US media outlets continue to label the vacation as being dead at the hands of millennials, IBISWorld disagrees. Here are some myths about millennials’ influence on the tourism sector.

Myth One: Millenials are ruining the vacationA common misconception of millennials’ vacation habits, which has been perpetuated by the media, refers to the group’s alleged unwillingness to travel. At the root of many of these articles’ arguments is the study of millennials’ work habits. According to a study by Project: Time Off, nearly 45.0% of millennials fail to use their allotted vacation time due in part to feelings of guilt for taking time off from work. Conversely, only 29.0% of the working world at-large fits this same criteria. One factor that may be contributing to this discrepancy is the tendency for millennials to get married later on in life, which gives them more time to focus on career goals and professional development. As a result, these factors have strengthened the notion

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that millennials are significantly less likely to take vacations, which has caused other age demographics to scale back on their own vacation times to keep up with their younger colleagues.

However, IBISWorld data shows that millennials may not be ruining the vacation at all, and reports supporting this perception may have been drastically overstated. IBISWorld estimates that travel has increased strongly in recent years, with domestic trips by domestic travel travelers growing at an annualized rate of nearly 3.0% over the past five years, to reach nearly 729.0 million trips. This overall annualized growth is supported by consistent increases every year since 2010. Such strong growth indicates that millennials are indeed traveling, and that growth is not being propped up by older travelers alone. Similarly, independent reporting from Mintel shows that millennials are nearly 10.0% more likely to travel than the average American consumer. Regardless of whether or not millennials are in fact more likely to forfeit their vacation time from work, they certainly are not to blame for killing the vacation.

Myth Two: Millenials are bad for tourismAs mentioned, tourism is highly influential in dictating the performance of various industries. As a result, poor performance in these industries has strengthened the myth that millennials have killed the vacation. However, the vast majority of IBISWorld’s tourism-related reports show solid, sustained growth and upward trends in aggregate tourism-related revenue since 2010. As a barometer for overall performance, Tourism in the US (IBISWorld report NN002) has experienced annualized revenue growth of 3.2% over the past five years. Such growth shows that tourism spending is on the rise, as is millennials’ economic influence. Industry value

added, a measure of the industry’s contribution to the overall economy, has outpaced GDP growth during the same period nearly 20.0%.

Aside from this age demographic’s work habits, millennials’ spending habits are just as important to the tourism sector. Harris Group Inc. studies found that 72.0% of millennials prefer to spend their money on experiences, such as traveling, rather than on material objects. A common example of millennials’ experience-based spending includes travel to concerts or conventions, which have increasingly been viewed as travel destinations by young participants.

As a result, Event and Concert Promotion (IBISWorld report 71133) and Convention Bureaus and Visitor Centers (IBISWorld report56159) industries have both grown at rates above an annualized 3.5% over the five years to 2016. Overall, travel spending is up in the United States, and a handful of new industries are benefiting from how and why millennials travel.

Myth Three: Millenial-driven sharing services are harmful to traditional travel servicesDespite the growing influence of the millennial cohort, travel industries that the age group seems most averse to continue to grow in recent years. The sharing economy is widely associated

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with millennial culture, which has caused concern for many as to how this trend will disrupt the transportation and accommodation industries that are firmly entrenched in the travel sectors. However, traditional service-based industries are adapting to cater to the growing millennial consumer base. For example, in the era of Airbnb, which caters mainly to younger travelers, there has been a growing fear for the life of the hotel industry, which thrives on tourism. However, Hotels and Motels in the US (IBISWorld report 72111), are currently operating at all-time revenue highs. Over the past five years, this industry’s revenue has grown at an annualized rate of 4.2% and revenue per available room, a key success metric for hotels and motels, has risen an annualized 34.6% since 2010. Car rental services (IBISWorld report 53211), another tourism mainstay, has experienced solid revenue growth of an annualized rate 3.0% over the five years to 2016, despite concerns that millennial-focused companies like Uber and Lyft would damage the industry’s performance.

These industries, which have been viewed as being potentially threatened, have found some success, which is attributable, in part, to their abilities to reach out to younger consumers. Some hotel chains have launched entirely new brands to appeal to this age demographic. For example, Marriot has catered its Moxy Hotels brand to millennial travelers. Travelers can check in at bars instead of front desks and stay in rooms with pared down amenities that enable the chain to offer lower price points. Car rental companies have sought to increase the ease of the reservation, pick-up and return processes and lower price points for frugal younger consumers. In 2015, J.D Power’s North American Car Rental Satisfaction Study found that overall

rental car satisfaction earned its highest index score since the study’s 2006 origin, drawing more young consumers into the fold with better, less expensive services.

Don’t believe the hype: Evolution not destructionWhile millennials’ attitudes toward travel and their overall spending habits are certainly different than those of previous generations, the age group is not to blame for killing the vacation or any travel-related industries. Recent concerns about the effects of millennials’ work, leisure and spending habits on the tourism sector have been overstated; similarly, assumptions have been devised too quickly regarding the demise of the more traditional travel industries. These common judgements and myths have been disproved by the majority of IBISWorld reports on tourism-related industries, which show strong signs of growth. Though many were quick to assume that the industries most affected by millennials would wither away at the hands of the age cohort’s growing influence, such industries have instead adapted to the changing consumer landscape and as a result, have continued to thrive.

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