A new itinerary for the tourism industry

McKinsey spoke with more than 5,000 travelers across geographies and generations as part of a recently published survey that reveals clear differences in behaviors, motivations, and expectations among a diverse set of tourists. On this episode of The McKinsey Podcast, McKinsey’s Margaux Constantin and Jasperina de Vries speak with editorial director Roberta Fusaro about data that can help travel and tourism companies tailor their offerings and realize more bookings, higher satisfaction, and, ultimately, repeat visitors.

In our second segment, from our CEO Insights series, McKinsey senior partner Kurt Strovink shares an approach to help CEOs connect with stakeholders—a relationship that’s prized but too often elusive.

This transcript has been edited for clarity and length.

The McKinsey Podcast is cohosted by Lucia Rahilly and Roberta Fusaro.

What motivates travelers to hit the road?

Roberta Fusaro: We’re here to talk about the way we travel today, specifically about a piece of research that McKinsey did with more than 5,000 travelers from China, Germany, the United Arab Emirates, the United Kingdom, and the United States.

We asked them about the motivations, behaviors, and expectations behind their travel experiences. One of the more interesting findings from the report is that travel isn’t just of “interest,” and I’m putting that word in air quotes. It’s becoming a priority for a range of consumers, including me. Margaux, why is this so?

Margaux Constantin: We clearly see that for people all over the world, travel has never been so top of mind. And that might be because of more than just the pandemic. About two-thirds of the people we interviewed said they’re more interested in travel than ever before.

If you take the younger generations, that number is even higher: 76 percent have never been so keen to travel. But that’s something that we’ve seen happening over the past decade, where there’s been a shift from spending on possessions to spending on experiences, particularly for the younger generations. Maybe the pandemic was a bit of a catalyst. But that really comes from a much longer cyclical trend in the industry.

Roberta Fusaro: What differences did you see among travelers of different ages? What matters most to Gen Z, for instance?

Jasperina de Vries: Gen Zers are interesting because travel has become a top priority for them. In fact, last year, millennials and Gen Zers took an average of nearly five trips versus less than four for Gen Xers and baby boomers.

The number-one consideration we clearly see for Gen Zers when selecting a destination is experiencing something new. For the younger generations, there’s a real draw toward using travel as a means to interact with different cultures and explore the unknown.

That makes international travel increasingly appealing for these younger generations. International travel feels more within reach for them. The cost has come down, especially with the abundance of low-cost airline seats. Travel has also become more convenient. It’s easy for them to get oriented in a destination before they travel. Mobile connectivity overseas has become cheaper. It’s easy to translate things when you get there.

Social media is also helping younger generations shape their ideas about faraway destinations when they’re thinking about their next trip. And 92 percent of younger travelers reported that they were influenced by social media, in that sense. Social media makes the world feel smaller and bigger at the same time.

Roberta Fusaro: What about Gen X and boomer travelers?

Jasperina de Vries: For the older generations, the number-one travel motivator is friends and family—to either visit them or travel with them. That motivator is put far ahead of visiting a new place or going to a place that everybody’s talking about.

Older generations are also very strategic about how they spend. Only 7 percent of the baby boomers we surveyed will go all out when they travel. But that doesn’t mean that they’re unwilling to spend, because baby boomers do spend three times more on travel than Gen Z.

They are willing to make their trip easy and convenient. They are willing to spend to make things less burdensome. They’re willing to travel in the offseason. They’re less likely to try and save by taking longer or connecting flights. And they are almost twice as likely as younger generations to cut expenses when needed, but they place emphasis on the quality of their accommodations.

Margaux Constantin: What’s interesting is that baby boomers spend three times more on travel than Gen Z. But Gen Z spends a much higher share of its disposable income on travel. That’s the big paradox here.

The role of technology in travel

Roberta Fusaro: How do different generations incorporate technology into their travel plans?

Margaux Constantin: What we see with older generations is quite a bit of fatigue with technology in the travel process and a feeling that if you’re not a digital native, the steps of traveling have become quite challenging. That may or may not be correlated with the fact that they tend to visit destinations they’re more familiar with, that they have been to already, rather than explore new destinations. So they can rely a bit less on those tools.

What that means is that travelers still like to have a digital and analytics-informed travel journey and travel process, but that doesn’t have to get in the way of human interaction. What we see with older generations is frustration that every site or attraction you try to go to now [involves] a machine that they’re struggling to interact with or to get the right information from. And that’s where some of the disconnect can happen.

Traveler priorities across different global markets

Roberta Fusaro: The survey also gets into some of the differences among travelers in different markets. We’re looking at travelers in China, the US, the Emirates, and some Europeans. What did you see there? What are travelers in different markets more or less likely to prioritize?

Margaux Constantin: What’s quite interesting here is despite the world becoming more globalized or feeling like it’s become more globalized, the differences in travel preferences across those markets remain really strong.

If you start with the Chinese travelers, they are changing a lot. There is still a very large chunk of that market that wants to prioritize these iconic travel experiences, these famous bucket list [trips]. About 69 percent of our Chinese respondents want that bucket-list-type holiday. For North American and European travelers, it’s only 20 percent.

At the same time, we also see in the Chinese market a real enthusiasm and passion, fueled by the pandemic, of rediscovering their domestic heritage and traveling much closer to home. We see the Chinese domestic-travel market growing at about 12 percent in the coming years and overtaking, very quickly, the United States as the world’s largest domestic-travel market.

If you compare this with travelers from the United Arab Emirates, there is also a strong preference, closer to the number of Chinese travelers, to visit iconic destinations. But what they’re really after are active, sport-heavy holidays—being outdoors, hiking, and doing some sort of exercise. On the other end, Europeans and North Americans are a lot more homogeneous in their preferences; 40 percent see their vacations as a way to just get away from it all, which is two times higher than the share of Chinese or UAE-based respondents. And, of course, the best way to get away from it all is the traditional beach holiday, which remains the top destination for those markets.

Seven traveler archetypes

Roberta Fusaro: As part of the research, you identified seven clusters of travelers, all of whom share a lot of the same attitudes and motivations toward travel. These include sun-and-beach travelers, culture-and-authenticity seekers, strategic spenders, trend-conscious travelers, cost-conscious travelers, premium travelers, and adventure seekers. Let’s tick through each and the preferences embedded within them.

Jasperina de Vries: This is my favorite topic for two reasons. One is that these personas are intriguing. And two, there’s an especially key insight for travel players on going to the next level of customer understanding or guest understanding, in a similar way as we’ve done here in the research.

We used machine learning to identify clusters of our respondents with similar behaviors and attitudes and then looked at the key differentiators between these groups. There are seven in total. One cluster is the culture-and-authenticity travelers. They love to sightsee, they prioritize new destinations, and they’re willing to spend on experiences.

That contrasts with, for example, the strategic spenders, who are very careful about splurging on experiences and who also try to save on accommodations and flights. Another one that I would highlight is the trend-conscious jet-setters, who are ready to spend and who are very attentive to recommendations from friends and social media. These travelers would prioritize the more iconic or popular destinations.

But a key learning for players in the sector is to use the data to better understand the exact traveler archetype that you are trying to attract and learn how to meet their needs.

And in this sector, companies don’t always interact with their guests every day, as they do in, say, retail. But, still, our clients are surprised by how much they do know about their customers and how much privileged insight they have. Our research was based on 5,000 respondents. But imagine it’s hundreds of thousands or even millions of customers you have touched and what you can learn from them.

Using data to tailor travel experiences

Roberta Fusaro: Let’s pretend I own a company that organizes travelers around large safari expeditions and sightseeing experiences. How could I use the information in this report to boost sales or engagement?

Jasperina de Vries: I hope that the research opens up the aperture for many players in the industry, like the safari provider, to think more deeply about the different pockets of demand out there and to build up their understanding of the pockets that they have not yet been specifically targeting.

And this is the other point: it’s important to build out the understanding of your customer base and, from that, think through how that allows you to adjust your marketing approach.

One of my clients, for example, is looking to increase direct bookings. That’s something that many of our listeners will try to pursue. What my client does is look at a cluster of guests that already has a high degree of direct bookings. That cluster is made up of relatively similar people, but there are also people in that cluster who do not yet book direct.

The good thing is they look like those who do. And it’s relatively easy to nudge them into the type of behavior that you would ideally see, which is booking direct versus booking through an OTA [online travel agency]. And you can do the same with upselling and cross-selling, for example. This is more straightforward than you think, and it’s driven by the customer data you have today.

Margaux Constantin: Adding further to this notion of the travel safari company, and being a bit more focused on older generations, because they do spend more than younger generations. They spend three times more. But if you start thinking, “Maybe there is a new market in the younger generations and Gen Z because they are willing to spend disproportionately on experiences,” then you could engineer experiences for them. They might come on a low-cost flight, and they might stay in cheaper accommodations, but they will spend the $500 entrance fee to go gorilla tracking and have that experience.

There are these pockets of high willingness to spend. And that means you may also want to rethink your accommodation offering to be cheap without feeling cheap. It’s a lot about smaller rooms, shared rooms, but also high-quality shared spaces, high-quality open spaces, coworking spaces where people can mingle. We’re starting to see some players propose interesting things there.

Roberta Fusaro: How much of that is happening within the ecosystem?

Margaux Constantin: A lot of our clients are not sufficiently mining all the insights they have on what their travelers need. And there are so many more insights they could get. But a lot of our clients are also not sufficiently reactive or agile enough to act on those insights.

So what you’re describing is an example of such an action. But it could also be to launch certain promotional packages, which is easier, or redo parts of your website, which is also easier. The translation to action remains slow.

It usually takes three years to build a hotel. In those three years, how do you keep evolving your builds to meet the evolving needs of your travelers or, at least, build things in a way that gives you enough agility once the property opens?

Jasperina de Vries: But, to your point, Roberta, in the ecosystem orchestration, we don’t see a lot of syncing up among players yet. But there is an increasing eagerness to grow tourism destinations, because folks are seeing that it’s important to build out full itineraries to make the most out of that first stay so that the traveler takes away a positive experience and goes back home and talks about it. It’s important for growing markets to build everything out in sync. And we see a lot of eagerness among stakeholders to get there. It’s easier said than done, of course.

New opportunities

Roberta Fusaro: Are new businesses springing up out of this renewed zest for travel?

Jasperina de Vries: For this year, we expect that tourism will be a full 9 percent of global GDP. So it’s creating a lot of new economic activity. And there is a lot of opportunity for stakeholders who can cater to the preferences of new travelers.

Roberta Fusaro: Some travel companies struggle with their data strategies. If you’re somewhere in the middle of the journey with your data strategy, are there things that you can do right now to start to understand customers better?

Jasperina de Vries: Hospitality clients are surprised by how much they can do with the data and privileged insights they already have as first parties versus intermediaries. For example, we helped one company build out something basic to start with: sending out three types of messages to customers based on a best guess of their propensity to travel to a particular destination.

We sent one set of customers an email about news from that destination and included a convenient travel offer for them. The second group we wanted to convince, so we sent them an email before their next estimated travel date and included a more price-sensitive offer. And for the third group of customers, who we think might not be highly likely to travel but who could be tempted, we tried to attract them with a special offer.

So this is not about building out a full set of email journeys and cross-channel journeys. This can start really small and still be effective.

Memorializing trips through social media

Roberta Fusaro: Jasperina, you’d mentioned the use of social media among Gen Z travelers. I’m curious about this idea of memorializing the travel experience and how providers and players in the tourism ecosystem could think about that differently.

Margaux Constantin: In our research, we see that more than 70 percent of travelers say they’ve posted photos of their vacation on social media in a very systematic way. And, of course, for younger generations, that share is north of 95 percent. It’s absolutely become the norm.

Then, if we go back to the times of even ancient Greece, you will find various ways of capturing travel memories in some shape or form. As we mentioned earlier, more than 90 percent of Gen Z travelers will be influenced by social media posts when deciding to visit a certain place, especially posts they see from friends and families or from celebrities they trust.

That creates several opportunities for the industry. Definitely everything related to social media strategy, influencer strategy, encouraging folks who come to visit to repost about the hotel, repost about the attraction, repost about the destination, is key, given how big this is in the consideration funnel of travelers.

But this is also creating opportunities for new businesses to emerge in this space of journaling, if you like. And we see microblogging platforms trying to give travelers a different way of sharing with friends and family outside of the traditional social media platforms, which is also interesting.

Roberta Fusaro: I’m feeling bad for the seaside sketch artist who you would walk up to, and they would sit there with their pen . . .

Margaux Constantin: Actually, that one, probably, has never been a bigger celebrity. There is so much they can do on social media, even if they have limited drawing skills. There’s a big career as an actor in that space.

The impact of gen AI

Roberta Fusaro: Jasperina, you mentioned the use of generative AI [gen AI] on the back end of travel experiences. Are there other applications of gen AI that you could see going forward?

Jasperina de Vries: We saw in the survey that about a quarter of travelers have tried using AI or gen AI to plan a trip, and 80 percent said that they would be interested in trying to use AI or gen AI to plan a trip. So, there’s an expectation that the use will grow.

We also see that the first versions of gen-AI-based travel planners can only do so much. So this is definitely an evolving space that still needs time. But it is quickly evolving.

And we talked about some of the use cases there. The gen AI piece that can come in is, for example, about making it easier to create marketing content. Going forward, we should also be mindful of the role that AI and technology plays and the implication it has on the workforce.

What we continue to see for hospitality and tourism is if there’s one sector where the human touch and the tech enablement of that remains so important, it’s hospitality because this is a moment in time for all travelers, where they are keen to experience something new and they also want to be taken care of. And so we expect that frontline staff, travel advisers, etcetera, will continue to have an important role in that travel or booking experience, empowered by technology.

Destination overload

Roberta Fusaro: We’ve been talking a lot about growth in the market. Is there something that the service providers or players in the tourism ecosystem have to be aware of, given all this fast growth?

Margaux Constantin: The growth is not very evenly spread. What we tend to see is if you take the 15 destinations today that have the highest concentration of visitors per square kilometer, these are also the destinations that I expect to see the fastest growth of visitors in the coming years, so anything leading to 2030 from 20 percent further growth, all the way to 86 percent for places like Marrakesh and Morocco.

At the same time, travelers say that when there’s just a bit too much of a crowd, it has a highly negative impact on their travel. Seventy percent of our respondents mentioned negative experiences related to overcrowding in their travel in the last 12 months.

So as we grow, we really need to put in place the right measures and be very thoughtful about how we ensure that visitors have the best travel experiences they can—whether it’s in more rural, quiet areas, but also in some of the most visited places—and really keeping that strong visitor experience.

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Why CEOs must connect with stakeholders

Lucia Rahilly: Next up, senior partner Kurt Strovink says CEOs understand the importance of connecting with stakeholders, but too few know how to do it.

Laurel Moglen: Stakeholders, like investors, customers, the media, and employees, all want to hear from CEOs on a wide range of issues. Kurt, through your conversations with CEOs, how important is it for CEOs to engage with the public?

Kurt Strovink: It’s very important, and it’s becoming more important as time goes on. Communications and stakeholder engagement is one aspect that many CEOs are less prepared for, relative to what it takes.
It’s not something they’ve necessarily encountered in previous roles before becoming CEO. And the enormity of the number of stakeholders, the balance between them, and how to manage and negotiate this is something that I think dawns on new CEOs quite quickly.

Our own research suggests that 58 percent of CEOs think that external affairs is a top priority for them. But only 12 percent feel that they’re handling it really well. I would also say some of the leading CEOs, those who have become skilled at being a CEO over time and some of who we’ve profiled in our book CEO Excellence, have also drawn attention to this priority.

Satya Nadella, the CEO of Microsoft, has talked about how important it is to be able to manage multiple constituents in the world—team members, employees, customers, governments. As a CEO, you need to create that sort of continuous balance between multiple constituents.

Laurel Moglen: What’s the best way for leadership to adapt to this priority?

Kurt Strovink: In terms of how to adjust to this priority, we’ve tried to synthesize our perspectives into an approach called EDGE. It’s an acronym that encompasses four ideas for CEOs to understand what’s important.

The first idea is expanded. CEOs must think about themselves as a bridge to the outside world. They must recognize that they’re kind of public in all their comments at all moments. That’s a different mentality than thinking about yourself as a personal leader inside of a company, where your words won’t travel as far.

The second idea is distinctive, by which we mean do only what the CEO can do or try to think about those things that can’t be delegated. There are many things that you can have other people do on your behalf, but some of the communication needs to be from the CEO seat itself.

The third idea is growth oriented. Some of the best communicators and stakeholder balancers think a lot about growth in their communications. It’s something that’s ever present in the way that they interact with the outside world. It’s part of how they emphasize the upside of their companies, their contribution to the world.

The fourth and final idea is engagement. This means going beyond influencing stakeholders to try to truly inhabit the mindsets that they have, meet them on their own terms, and work from there.

This is one way to think about four important best practices that we think of in the context of communications with different constituent groups and to adapt to them.

Laurel Moglen: As leaders incorporate all that EDGE means into their communications platforms, what strategies have you seen work for them?

Kurt Strovink: I have seen a few strategies that work for CEOs and a few markers for progress as CEOs become more excellent on this dimension. I often will observe a CEO’s narrative itself—the way they talk about what they’re doing, what they’re here to do, what their company’s purpose is, how they engage their own employees—and I will listen for how proprietary that vocabulary is and how authentic it is to them. And we often find that CEOs who become skilled at this will have certain terms that they put more weight into, certain things that become meaningful. So this idea of the singular narrative with proprietary language is hard to encourage anybody to do, but we notice it as a distinctive strength.

I also find that CEOs need creative ways to enrich this narrative over time, to have it take in additional elements of what happens around them. They must repeat this narrative, sometimes more than they’d like to in different settings. They should find energy and enthusiasm and vitality in doing that authentically. It’s very important to see yourself as a real communicator of this message in broadcast and in narrowcast forms. The former CEO of US Bancorp, Richard Davis, said the holy grail for him was to have 12 people on a management team who were equal voices and equal storytellers.

What that means is that there are people who can speak for the team, for the company, not just for themselves. Sometimes, you see CEOs who develop enough of a narrative that they get another dozen people on their management team to really make it theirs and sound similar themes.

These CEOs create propagation that’s much greater inside the company and outside the company because they have other people and their management team who are fully resonant with those messages.

One last thing that I’ll share from our work with CEOs is what we call the four Ws: “who” “why,” “what,” and “when.”

You have to think about “Who you are?” or “Who do you want to be?” You’re really thinking about the identity of the organization separate from the initiatives and activities that are under way.

You also have to think about the why. “Why is it there?”

This gets us to the what. “What is the purpose?” or “What’s a larger mission that motivates?” This leads you to think about the series of things you’re doing. And that ladders down into many aspects of strategy, initiatives, and the like.

Lastly, you think about the timing, the execution of the plans, which is summarized by the when.

But I do see a failure mode in CEOs. They’re very good about the what and the when, though maybe not as thoughtful as they could be about the who and the why.

And in self-propelled organizations, especially organizations of high talent, there’s tremendous latent potential in deeper dialogues about the “who” and the “why.”

I would encourage all CEOs to think about all four Ws evenly as they think about building some of these messages, these narratives of meaning, and as they chart the course to figure out what they’re solving for with so many different constituencies.