McKinsey's Future of Tourism article expects travel and tourism GDP expected to grow at an average annual rate of 5.8% between 2022 and 2032, surpassing the growth of the overall economy, which is expected to grow at 2.7% annually. The report highlights 2 main aspects of future of tourism: contractless interactions and shortage of labor
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McKinsey’s Future of Tourism article states that tourism is showing resilience, with a persistent desire for travel. Against all odds, international tourism rebounded in 2022, with visitor numbers to Europe and the Middle East reaching approximately 80% of 2019 levels, and the Americas recovering about 65% of pre-pandemic visitors. This achievement is particularly significant because it excludes travelers from China, which had the world’s largest outbound travel market before the pandemic.
The recovery and growth in tourism are expected to continue. According to estimates from the World Tourism Organization (UNWTO) for 2023, international tourist arrivals could range from 80% to 95% of pre-pandemic levels, depending on factors like the economic slowdown, travel recovery in the Asia-Pacific region, and geopolitical tensions. Similarly, the World Travel & Tourism Council (WTTC) predicts that by the end of 2023, nearly half of the 185 countries it researches will have either recovered to pre-pandemic levels or be within 95% of full recovery.
Long-term forecasts also indicate optimism for the coming decade, with travel and tourism GDP expected to grow at an average annual rate of 5.8% between 2022 and 2032, surpassing the growth of the overall economy, which is expected to grow at 2.7% annually.
However, the travel and tourism industry continues to grapple with a prolonged and widespread labor shortage. After losing 62 million jobs in 2020, labor supply and demand remain imbalanced. In the European Union, approximately 11% of tourism jobs are expected to remain unfilled, while in the United States, that figure is 7%.
One major factor contributing to the labor shortage is the exodus of tourism staff, particularly those in customer-facing roles, to other industries. The industry is struggling to bring these individuals back into the fold. The shortage of staff in hotels, restaurants, cruises, airports, and airlines can lead to operational, reputational, and financial challenges. If not addressed, these shortages could hinder the industry’s growth.
The current labor shortage may be rooted in the nature of work in the industry. Tourism-related jobs are often informal due to high seasonality and weak regulation. These jobs are associated with long working hours, low wages, high turnover rates, and a lack of social protection, which are more prevalent in an informal economy. Shift work, night work, and temporary or part-time employment are also common in the tourism sector.
To secure a more sustainable future, the industry may need to make itself more attractive to talent and create conditions to retain staff for longer periods. Alternatively, it can enhance its products, services, and processes to address staffing needs and alleviate existing challenges. One solution could involve building a workforce with a blend of digital and interpersonal skills to cater to travelers’ changing demands. The industry can leverage technology to provide travelers with digitally enhanced experiences, mitigate staff shortages, and improve working conditions.
The pace of technological change has transformed customer expectations, with technology-driven services offering convenience and efficiency. The travel industry may benefit from incorporating more digital innovation to streamline processes and enhance the quality of human interactions.
While digital solutions and automation are on the rise, they can help address labor shortages and improve customer experience. By embracing digital technology, the industry can overcome common pain points, such as long queues, misunderstandings, and misinformation, while preserving the value of human interaction.
Contactless future:
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In summary, the travel and tourism industry faces both opportunities and challenges. It can harness digital innovation to bridge the labor gap and meet evolving customer expectations, but it must also remain attentive to competition from technological advances, particularly in the form of virtual experiences. Balancing the digital and human aspects of travel may be the key to a successful and resilient future for the industry.
Source McKinsey
