THE EXPERIENCE

REVOLUTION
WHAT MATTERS FOR THE FUTURE OF TOURISM
CONTENTS
1. EXECUTIVE SUMMARY  5
2. INTRODUCTION  6
3. SEVEN KEY TRENDS SHAPING THE FUTURE OF TOURISM  10
Asian middle-class tourism 12
Digital and social media 13
Sharing economy 15
Responsible tourism  16
Solo travel  18
Mass personalization 18
Experience over product 20
4. THE EXPERIENCE REVOLUTION  22
The evolution of expectations from product to experience based calls for
a change of model  22
Experiential offerings can lead to positive outcomes 28
5. CONCLUSION  30
EXECUTIVE SUMMARY
Tourism and travel are surging across the globe, driven by a growing middle class. In 2017, there
were 1.3 billion tourists traveling to and fro across the world. By 2030, UNWTO expects the number
of tourists to swell to 1.8 billion, thanks to broad-based economic growth throughout the world, but
particularly in Asia. By the end of the next decade, 30 percent of international travelers will be Asian.

Coupled with this rapid growth, new trends across the globe are reshaping the tourism industry.
Understanding them is key for stakeholders to redefine their value proposition and meet
customer behaviors and expectations. The following trends will have the greatest impact over
the coming decade and beyond: the rise of the Asian middle class; digitalizaton; the emerging
sharing economy; tourism and sustainability; the solo traveler; personalization; and the shift from
product to experience.

These shifts will all have an important impact on tourism and on the industry, as will the challenges
of sustainable development and heritage preservation, which are becoming increasingly complex.
But perhaps the most important of these trends is the movement towards greater personalization
and experience-based travel.

Travelers everywhere are redefining expectations. They are seeking tailor-made journeys, with
a shift from a product-based to an experience-based paradigm, aiming to live memorable
experiences. This is creating new challenges for industry players but also presents unique
opportunities for differentiation, development, and investment. To meet the needs of tomorrow’s
travelers, the industry will need to adapt, which means understanding the subtleties and
differences between customer preferences and motivations.

Travel players need to position themselves as much as possible across the entire travel lifecycle, from
the initial phases of planning and travel to the experiences during the travel and beyond, with the aim
of offering the best customer experience possible. Harnessing the paradigm shift from product to
experiences also means starting from the key interests of the guests.

We are in the very early stages of what is an “Experience Revolution,” with expectations from
travelers that go far beyond products and traditional services. To satisfy the growing aspiration
for truly inspirational experiences, travel players need to start from the key interests of the guests
to develop the right offerings. Hotel operators will need to adapt to be able to meet guests’
expectations in alignment with their community of interests. Marketing, pricing, distribution,
partnerships, customer engagement, and human resources will also need to evolve accordingly.

For those tourism actors who can successfully adapt and stand out by providing unique quality
experiences to attract global travelers, the “Experience Revolution” represents an opportunity.

5
 INTRODUCTION
Tourism is a global phenomenon, one that has undergone an extraordinary transformation over
the past 75 years. Unlike the past, when travel and tourism was a privilege enjoyed by the wealthy
few, travel today is open to vast numbers of people across the globe, in every country and on
every continent. But the ultimate objective and goal of travel, an objective that goes back to
time immemorial, has remained constant: to experience something new, authentic, and unique.
Indeed, in an age of commoditized travel and tourism, people increasingly are seeking the
experience of those earlier travelers and explorers: travel as a form of exploration.

Travel has become accessible to an increasingly broad spectrum of the population. In 2017, there
were 1.3 billion tourists going to and fro across the globe vs. just 25 million in 1950—a 52-fold
increase. (See Exhibit 1.) Last year, this number grew significantly in all regions of the world and
well above all forecasts (7 percent in 2017 vs. 3.8 percent per year for the period 2010-2020
forecast by the United Nations World Tourism Organization [UNWTO]). By 2030, UNWTO is
expecting 1.8 billion international tourists thanks to continued global economic dynamism.

Coupled with this rapid growth, new trends across the globe are reshaping the tourism industry.
Understanding those forces is key for stakeholders to redefine their value proposition and meet
customer behaviors and expectations.

For example, 30 percent of international travelers will be Asian by 2030 (many of them from
China). While Chinese tourists historically focused on shopping and visiting world-famous cities,
they are also showing a growing interest in alternative experiences. In addition, new trends, such
as immersive technologies, digitalization, and the sharing economy, are emerging. Travelers
everywhere are redefining expectations. They are searching for tailor-made journeys, with a
shift from a product-based to an experience-based paradigm, and are aiming for memorable
experiences. These are but a few of the new trends, which we will examine further. But to meet these
needs, businesses will need to adapt, which means understanding the subtleties and diversities of
tourists’ preferences and motivations. This is creating new challenges for industry players but is also
presenting unique opportunities for differentiation, development, and investment.

Given these trends and customers’ expectations, an essential dimension for industry players to
consider is the desire of tourists for unique and truly inspirational experiences. Travel actors need
to position themselves across the entire travel lifecycle, from the initial phases of planning and
travel to the experiences during the travel and beyond, with the aim of offering the best customer
experience possible. Harnessing the paradigm shift from product to experience also means
starting from the key interests of the guests: art, culture, wellness, adventure, and sport (to name
but a few), which as entry points are quite different from the classic criteria of hospitality.

In this context, brand standards or “classic” experiences are largely insufficient and will
need to be rethought.

Copyright © 2019 Oliver Wyman

Exhibit 1: Breakdown of the tourist spending and tourist arrivals per region

$XX TOURIST SPEND

Competitive Landscape x%
% OF TOTAL SPEND

World Tourism Market

THE NUMBER OF TOURISTS IN THE WORLD HAS INCREASED
FROM 1.235 MILLION IN 2016 TO 1.326 MILLION IN 2017 (+7%)

Tourist arrivals 2017

and Growth vs. 2016
Spend in US$ BN
2017 tourists arrivals in MM
and growth vs. 2016

World
1,326 Million $519 BN
+7% 39%
$326 BN
Americas 24% $390 BM
211 Million 29%
+5% $68 BN
5%
Europe
672 Million
+8% $37 BN
3%
Africa
63 Million
+9%

Asia Pacific
323 Million
+6%

Middle East
58 Million
+5%

Notes: Expenditure by international visitors on accommodation, food and drink, entertainment, shopping and other goods and services in tourism destinations
Source: UNWTO, Oliver Wyman Analysis
 SEVEN KEY TRENDS SHAPING
THE FUTURE OF TOURISM
Demographic changes, customers’ evolving needs and behaviors, and new technologies will
profoundly transform tourism over the coming decades through several trends. (See Exhibit 2.)
Understanding those trends is key for players to redefine their value proposition, meet new
customers’ expectations, and strengthen their position in the market. We have identified seven
key trends that will impact the future of tourism:
•• The Rise of Asian Middle-Class Tourism
•• Digitalizaton
•• Sharing Economy
•• Tourism and Sustainability
•• The Solo Traveler
•• Personalization
•• The Shift from Product, to Experience

Exhibit 2: Tourism trends

WHAT TRENDS ARE SHAPING THE FUTURE OF TOURISM?

ASIAN MIDDLE-CLASS TOURISM

30% Of international travelers are expected to be asian by 2030

DIGITAL
The new generation of tech savvy travelers expect stronger digital engagement

SHARING ECONOMY
Collaborative platforms with robust value propositions are booming

RESPONSIBLE TOURISM
Awareness around sustainability is rising

SOLO TRAVEL
Globetrotters are going solo, especially women and adventure seekers

MASS PERSONALIZATION
One size does not fit all anymore

EXPERIENCE OVER PRODUCT

Customers are shifting from a product to experience paradigm

Source: Oliver Wyman Analysis

Copyright © 2019 Oliver Wyman

 ASIAN MIDDLE-CLASS TOURISM: 30 PERCENT OF INTERNATIONAL around shopping and on visits to famous and historically important cities. However, they too are
TRAVELERS ARE EXPECTED TO BE ASIAN BY 2030 beginning to show signs of a broadening of interests and are displaying a curiosity and awareness
of alternative experiences.
In 2017, Chinese tourists led the world in holiday dollars spent. (See Exhibit 3.) Every year
sees more outbound Chinese travelers than the last, with the number reaching 150 million Looking forward, the most significant increase in demand for tourism will come from Asia: of the
annually. These travelers have gained a reputation as big spenders, and many businesses more than 2.4 billion people who are projected to join the global middle class from 2015 to 2030,
worldwide are targeting them closely. Indeed, Chinese tourists traditionally focused their trips 90 percent of them will be Asian. By 2030, 30 percent of international travelers will be Asian.

To effectively address this growing group of tourists, industry players must adapt to their specific
Exhibit 3: Top tourists spenders in 2017
preferences and needs, which differ from those of other international travelers. One prime
$BN example of adaptation is the French department store Galeries Lafayette, which opened an
258
annex dedicated to Chinese tourists. The annex features a targeted collection of items aimed
at appealing to Chinese tastes and sensibilities; but in addition to targeting the wallet of the
Chinese (who on average spend 1.6 times more on shopping than other tourists), there are other
more subtle attractions: the annex’s architecture was designed to reflect Asian themes, and the
labels are in Mandarin, further aiding the Chinese in their shopping journey.
135

Growth of Asian tourism and rise of Asian fintechs

89
71 In 2018, one-third of the exhibitors in the Consumer Electronics Show in Las Vegas were Chinese.
41 China’s tech industry is rapidly growing, fueled by a massive demand by a tech-savvy population:
34 32 31 31 28
mobile payments, money transfers, and express delivery are common in China at a time when
these technologies are still emerging in Western countries. (See Exhibit 4.)
China United Germany United France Australia Canada Russia South Italy
States Kingdom Korea To ensure the best experience for Chinese tourists, travel players are starting to introduce these
Source: UNWTO Chinese technologies, thus enabling the expansion of fintech in the West. For example, Dubai-
based Mashreq Bank partnered in 2018 with Alipay, rebranded as ANT Financial Services Group
(a Chinese mobile payment provider), to enable 1,000 retailers in the UAE to offer mobile-
Exhibit 4: Preferences of Chinese tourists
payment services, thus making it easier for Chinese travelers to use their devices to make
x1.5 less consider affordability when choosing overseas travel destination vs. non- purchases. ANT raised $10 billion in May 2018, turning it into the world’s most valuable unicorn
Chinese tourists startup, with a valuation of US$150 billion.

In 2017, Marriott hotels chain partnered with Alibaba in a joint venture. The joint venture will
Travel preference type are more diversified (independent travel, semi-
manage Marriott’s storefront on Fliggy, Alibaba’s travel service platform, link both Marriot and
independent travel, package travel & customized travel are resp. preferred by 49%,
42%, 34% & 25%) Alibaba’s loyalty program, and help Marriott hotels provide a customized travel experience to
Chinese travelers through tailored content, programs, and promotions.

X1.6 in shopping spending vs. non-Chinese tourists

DIGITAL AND SOCIAL MEDIA: THE NEW GENERATION OF TECH-
65% use mobile payments platforms during oversea travels vs. 11% for non-
SAVVY TRAVELERS EXPECT STRONGER DIGITAL ENGAGEMENT
Chinese tourists With the emergence of new technologies and the rise of a connected generation of travelers,
customers have strong expectations concerning players’ digital engagement. Indeed, the journey
Source: Nielsen, Outbound Chinese Tourism and Consumption Trends, 2017
of the tourist, whether she/he is Asian, European, or African, begins long before the tourist departs

Copyright © 2019 Oliver Wyman 13

 home and ventures abroad. All of the travel industry’s key actors need to have a digital presence The rise of smart speakers is a more recent trend but is expected to rapidly grow: given the
across the entire customer journey—before, during, and after the travel experience. This presence boom of smart speaker penetration over the past years, consumers are becoming accustomed
needs to be omni-channel: 50 percent of online travel searches are mobile and generate more to talking to vocal assistants, and travel companies will need to adapt. As of today, voice
than 25 percent of online travel revenues. Digitization has become even more crucial, with the technologies functionalities for travel booking are still limited. Google Home for example allows
emergence of travel digital giants like Booking.com and Airbnb, which have captured 40 percent of users to check prices but not to book their hotels and flights. However, there is a strong drive
the travel market value in little more than a decade of being in business. to get voice technologies into hotel rooms: Recently, Amazon launched Alexa for Hospitality, a
special version of Alexa dedicated to hospitality players. Alexa for Hospitality is customizable and
Furthermore, in a world where 42 percent of the population is active on social media, 40 percent acts as a personal concierge. Several hotels chains such as Marriott, Best Western, and IHG have
of users are following their favorite brands, and 25 percent of users are following brands from begun using Amazon’s new technology. (See Exhibit 5.)
which they might make a purchase, companies need to have a strong presence and strategy for
social media marketing. Brands need to view social media marketing not as a requirement, but as Chatbots are already actively used by companies: on Facebook, more than 100,000 chatbots
an opportunity: a mature social media strategy is capable of leveraging influencers whose posts have been created and two billion messages are exchanged monthly between customers and
can deliver up to an 11 times higher return on investment than other forms of digital marketing, businesses. Expedia for example launched a Facebook bot in 2016 that allows users to search and
according to Nielsen. Social media marketing will integrate new advertisement tools offered by book hotels in English only. KLM’s bot is available in 10 languages and responded to 1.4 million
platforms such as Facebook or Instagram. customers’ queries in 2017. Companies’ efforts over the coming years will need to focus on more
actively leveraging the strong potential of this technology to further automate their operations
If tackled effectively, digital can become a great accelerator for industry players by helping them
and offer more functionalities via chatbots.
reach a larger audience, optimize their resources, increase their revenues, and improve customer
experience. Several travel players are already transforming their operations to better integrate
digital, creating new positions, such as community managers to reinforce their presence on SHARING ECONOMY: COLLABORATIVE PLATFORMS WITH ROBUST
social networks, and investing into IT to be able to keep pace. In parallel, they are experimenting VALUE PROPOSITIONS ARE BOOMING
disruptive technologies such as intelligent assistants, smart payment solutions, Blockchain
technologies, and virtual reality to stay ahead of competitors. In 2015, 30 percent of the market value of the top 30 digital companies came from collaborative
platforms like Airbnb, Uber, or HomeAway. Thanks to technological progress, these platforms
Illustration with Intelligent assistants technology have experienced rapid growth since 2012, and this trend is expected to continue over the coming
years. (See Exhibit 6.) For example Airbnb generated $2.6 billion in 2017 vs. $500 million in 2014
Interaction with AI assistants, whether via voice or chatbot, is an increasingly prevalent and (a five-fold increase) and is expected to generate $8.5 billion by 2020, according to Fortune.
important channel for customer engagement.
These actors have created disruption in the travel industry, and traditional players need to adapt
Exhibit 5: Growing digitalization : # of US households with smart speakers to protect their market share. As such, they need to further leverage loyalty programs, seek

MM, 2015 – 2022

75 Exhibit 6: Strengths of collaborative platforms over traditional players
-20-40% lower prices on Airbnb
Lower pricing

52%
60 compared to traditional models

45 More satisfying experience for +35 pts in customer satisfaction

penetration the customer compared to traditional models

30 by 2022* Better quality through autoregulation +14m/y reviews on Airbnb

15
X2.1 longer stays of Airbnb guests
More local and authentic experience
compared to traditional models
0
2015 2016 2017 2018 2019 2020 2021 2022 An accelerated adoption with users x3.5 additional income vs. interests
* Assuming a 0.8% yearly growth in the # of US households for 2017-2022 (2012 – 2017 CAGR) acting as both producers and consumers earned on savings
Source: Satista Source: Oliver Wyman Analysis

Copyright © 2019 Oliver Wyman 15

 to offer more unique local experiences to travelers by partnering with sharing startups (like has become a major concern among travelers, and the rise in the number of tourists will further
EatWithALocal), and emphasize the sense of community that travelers are increasingly seeking. fuel this phenomenon. (See Exhibit 7.) Overcrowding is deteriorating the environment of sites
and cultural heritage, impacting local residents’ lifestyles, and affecting the experiences of the
They can also enter this new space via acquisition, as in the case of Accor (the French hospitality tourists themselves:
company that operates AccorHotels). Accor acquired Onefinestay, a luxury P2P housing platform,
•• 80 percent of Koh Khai Islands’ coral reefs in Thailand have been damaged by people
and has launched an innovative new brand Jo&Jo which offers “open houses” with shared spaces
to foster community and experiences. •• The fast growth of inbound tourism in Barcelona has led owners to evict local residents to rent
properties to tourists at higher prices; violent clashes and protests against tourism followed
•• Overtourism in Dubrovnik results in a saturation of the city’s airports, causing flight delays and
RESPONSIBLE TOURISM: AWARENESS AROUND SUSTAINABILITY poor customer experience
IS RISING
To cope with the effects of overtourism, stakeholders have adopted various strategies: limiting the
With a scarcity of resources on the rise, an increased pace of climate change, and the rapid number of visitors, giving access to sites under certain conditions, closing sites to tourists, and
extinction of many species, overpopulation and the impact of human activities on the planet is applying strict regulation to players disrupting the local economy (to name a few). For example, the
becoming a concern. This is particularly true in the tourism industry, which represents 10 percent Greek island of Santorini is capping the number of daily visitors arriving by cruise ships. In Nepal,
of the world GDP and is an extremely resource-intensive activity. only travelers accompanied by a guide are allowed to climb Mount Everest. Venice has placed
temporary restrictions on tourists in areas designated for residents and regular visitors.
The impact of overtourism
To raise awareness on sustainable tourism, the United Nations named 2017 as the International year
In 2017, 25 percent of tourists felt that their destination has been overcrowded and 10 percent said of sustainable tourism. (See Exhibit 8.)
that this overcrowding affected the quality of their trip, according to IPK International. Overtourism
Companies and governments are starting to take positive action, shifting to sustainable
Exhibit 7: Sustainable tourism: the impact of overcrowding on Venice tourism, a form of tourism ‘that takes full account of its current and future economic, social and
environmental impacts, addressing the needs of visitors, the industry, the environment and
550 tourists per inhabitant
host communities,” according to the UNWTO definition. (See Exhibit 9.) This translates into a
Restrictions on tourists for certain areas commitment to reducing usage, transforming operations to achieve objectives, enforcing controls
1,000 locals leave the city each year out
of 50 000 inhabitants to track performance, seeking credibility through accreditation, and developing disruptive
Campaign launched to encourage
tourists to respect the city innovations as a step further toward sustainability.
Tourists are x4 more profitable leading
owners to evict locals
Ships over 55,000 tones will be banned Beyond social responsibility, sustainable tourism represents an opportunity for travel players,
Rise in demonstration against tourism from 2021 because raising awareness attracts consumers who care about their social impact and are willing
Source: France Cuture, Responsible tourism
Exhibit 9: Action taken by tourism actors toward sustainability
Exhibit 8: Tourism impact on environment
Control number of tourists Machu Picchu is capping the daily # of visitors
Intensive water usage 590 Liters per occupied room per day in US hotels in 2015 Commit to reduce usage by Starwood has committed to reduce energy usage
setting targets per room by 30% by 2020 vs. 2008
Intensive energy usage 75 kWh per occupied room per day in US hotels in 2015
Control to effectively track IHG requires all its hotels to measure their
goals’ achievements environmental impact
High pollution 859m tones of CO2 emitted by civil aviation in 2017
Conform to sustainability +1,800 Mariott hotels have a TripAdvisor
accreditation standards GreenLeaders badge
Sites overcrowding x5 more tourists than locals in Iceland in 2016
Offer ecotourism travel options Ecolodge hotels have made important
x1.5 more people visiting Petra than what environmental improvements to minimize their
Heritage deterioration
infrastructures allow environmental impact
Source: Oliver Wyman Analysis Source: Oliver Wyman Analysis

Copyright © 2019 Oliver Wyman 17

 to pay more for sustainable brands. According to a study from Nielsen in 2015, 66 percent of the
Exhibit 10: Female travelers going solo: key figures
population was willing to pay more for sustainable brands up from 55 percent in 2014. The social
awareness is particularly on the rise among millennials, with 73 percent willing to pay more for a
sustainable brand, up from 50 percent in 2014. of millennial women
26% have already travelled solo

SOLO TRAVEL: GLOBETROTTERS ARE GOING SOLO, ESPECIALLY Europe is the most common
WOMEN AND ADVENTURE SEEKERS solo destination

Some 50 percent of all those who travel on holiday, go solo at least once a year, and that trend
is expected to grow, driven mainly by women travelers and adventure seekers. According to +45% growth of solo women travels
between 2015 and 2017
Hostelworld, the world’s leading hostel-focused online booking platform, solo travel bookings
increased by 42 percent of between 2015 and 2017.
46% travel solo for freedom
and independence
During the same period, solo bookings by women grew 45 percent vs. 40 percent for men.

+230%
(See Exhibit 10.) Popular destinations for American women traveling solo are Cuba, Macedonia,
Guatemala and the United Arab Emirates. To address this fast-growing demand, women-only
travel companies are booming. Understandably, the main concern of solo travelers has been
safety, which strongly impact their destination choice. growth in women
solo travel company
MASS PERSONALIZATION: ONE SIZE NO LONGER FITS ALL in six years
In today’s highly connected world where users are used to getting what they want fast, the
Source: Solotravelerworld.com, travelsmartwoman.com, smcp.com, elledecor.com
demand for personalized services is on the rise. In fact, a majority of travelers would value a
personalized customer service experience over speed of service and would expect brands
Exhibit 11: Increasing personalization: interest in personalized travel services
to adapt their information based on their personal preferences or past behaviors. Moreover,

67%
according to an Epsilon study, 94% of consumers would be more likely to do business with of consumers said a personalized customer service experience was more
travel and leisure companies if they offered personalized experiences. This demonstrates just important than the speed of service
how important tailor-made offerings have become. (See Exhibit 11.)

As a result, the personalized customer experience has become a top priority for businesses
everywhere and in every industry. The good news is that with the help of AI, data science,
and other technological tools, firms have the potential of offering a bespoke experience by
94% of consumers would be more likely to do business with travel and leisure
companies if they offered personalized experiences

leveraging the voluminous data generated by the customer.

But the demand for tailor-made travel-related services outstrips other types of services, with
holidays, hotels, and flights the top three services for which consumers have expressed an
36% of travelers would be likely to pay more for a travel brand that tailors its information
and overall trip experience based on personal preference or past behavior

interest for personalization, according to the Deloitte study.

To meet customer demand, travel companies are offering more personalized services. For
example, Booking.com provides its customers with personalized recommendations, while 57% of US travelers consider that brands should adapt their information based on
personal preference or past behavior
Airbnb allows customers to look at “recently viewed places.” Best Western uses geo-targeting
Source: Aspect, Epsilon, Google, Phocuswright
to send specific offers based on users’ location.

Copyright © 2019 Oliver Wyman 19

 But personalization does not necessarily depend on technology and data alone. Virtuoso, sector, the value proposition traditionally has revolved around the delivery of exceptional
for example, is the leading luxury travel network. It provides its customers with tailor-made products and services. In its place, the hospitality industry will need to focus its efforts and
experiences in which every part of the trip is created to suit their individual style and budget. resources on providing customers with an exceptional and memorable experience through
unique activities and events.

EXPERIENCE OVER PRODUCT: CUSTOMERS ARE SHIFTING FROM The shift from a product-centric to an experience-based paradigm in tourism is the focus of
A PRODUCT TO EXPERIENCE PARADIGM the next section, where we will see that focusing on experiences has proven to be a more
performing model, requiring industry players to start from the key interests of their customers
Perhaps the most profound shift among tourists has been the movement away from product
and transform their value proposition.
and the move towards experience. According to an American Express Travel survey, 82 percent
of respondents value “making memories” more than they value making money. Similarly,
a Harris study found that more than three quarters of all millennials (78 percent) prefer
spending money on an experience or event to buying products. (See Exhibit 12.) Consequently,
consumer spending on experiences has increased and is now higher than spending on goods:
in 2017, US consumers spent 1.1 times more on experiences than on goods—in contrast to
2000 when they spent 1.3 times more on goods!

By definition, travelling is intrinsically an experience. However this paradigm shift that we are
seeing emphasizes even more plainly the desire of travelers to experience a unique, authentic,
local, and immersive journey.

To meet customers’ changing needs, travel companies need to reposition themselves from
a product-centric perspective to an experience-centric one. For example, in the hospitality

Exhibit 12: A greater emphasis on experience over goods: total spending on experiences vs. on
goods in the US
$TN, 2000 – 2017
2.4

2.2

2.0 +108%
1.8

1.6

1.4
+55%
Experiences
1.2

Goods +x%
1.0 2000-17 Growth
2000 2005 2010 2015 2020

Experience include: Domestic air & water transportation, Recreation services, Food & accommodation,
International travel
Goods include: Cars-related goods, Recreation goods, Clothing & footwear, Mobile & related
equipment, Personal care products

Source: US Bureau of Economic Analysis

Copyright © 2019 Oliver Wyman 21

 THE EXPERIENCE REVOLUTION
THE EVOLUTION OF EXPECTATIONS FROM PRODUCT TO
EXPERIENCE BASED CALLS FOR A CHANGE OF MODEL
The era in which a hotel was a standardized product is past. There is a fundamental shift
underway among consumers, emphasizing values and experiences that bring happiness and
wellbeing over material goods. Travelers today increasingly make decisions based on their
values and interests. They are actively seeking authentic and inspirational experiences—and are
prepared to pay more for it. Hence, there’s a growing need for the travel industry to shift toward
simplicity, balance, human connection, self-discovery, and authenticity. (See Exhibit 13.)

Most brands are aware of the need to adapt and are aiming to be more authentic, local, and
immersive, something that is apparent in their advertising and marketing strategies, which
increasingly are becoming experience centric.

Across industries, companies are becoming more than service providers; they have turned into
lifestyle pillars, as in the case of Google, Facebook, and Netflix. These brands are well positioned
to generate the personalization and goodwill to keep people coming back.

In that respect, the aim for travel actors is to move away from a transactional relationship
and build stronger relationships with the traveler who can rely on the brand for quality
recommendations and information. Groups like Accorhotels or Marriott international are making
significant efforts to build trust with their customers through their loyalty programs and by
offering various new services and activities. Marriott teamed up with PlacePass in 2017, adding
more than 100,000 travel experiences for guests worldwide. “We want our guests to count on

Exhibit 13: Moving from product, to experience

1940s 2010s
From product centric to experience centric
Ads leveraged facilities as a product to
appeal customers
ad campaigns
Ads focus on experiences, inspirations and values
to attract customers

“Australia’s largest,
most modern and best
equipped Hotel” “For a world of “When life feels “Go Beyond”
The Canberra understanding” perfect” Sheraton
Hyatt Four Seasons

Source: Oliver Wyman Analysis

Copyright © 2019 Oliver Wyman

 Remember that We wander
Investment in travel
happiness is a for distraction, You can shake is an investment
way of travel – not but we travel the sand from in yourself.
a destination. for fulfillment. your shoes, but it Matthew Karsten
Roy M. Goodman Marriott to give them access to more of the destinations and things they love to do when they
Hilaire Belloc will never leave travel,” said Stephanie Linnartz, Marriott International’s global chief commercial officer.
your soul.
unknown author The customer experience is not limited just to the trip, encompassing every stage in the travel
lifecycle: pre-stay, the stay itself, and post-stay. (See Exhibit 14.) Hospitality actors can provide
We travel, initially, to lose ourselves; and we travel,
value to customers across the entire travel lifecycle by multiplying their touchpoints with them
next to find ourselves. We travel to open our hearts Experience, and offering the best customer experience possible at each stage.
and eyes and learn more about the world than our travel – these
newspapers will accommodate. And we travel, in Traveling – it leaves you are as education In the pre-stay phase, for example, social media is a good way to engage customers in
essence, to become young fools again – to slow time in themselves. discovering and dreaming about their destination. Starwood, which is now part of Marriott
speechless, then turns
down and get taken in, and fall in love once more. International, is highly active on social media, with 250,000 followers on Instagram and
you into a storyteller. Euripides
500,000 likes on Facebook. In 2016, Starwood ensured the promotion of two hotels in Paris,
Pico Iyer Ibn Battuta
Le Metropolitan and Le Dokhan’s, by leveraging social influencers on Instagram and Facebook.
Moreover, beginning May 2018, customers can book hotel rooms directly from Instagram,
making it even more valuable for hotels to have a presence on such platforms. A quality website,
mobile application, and a loyalty program with meaningful “inner circle” exclusive personalized
privileges are musts for assisting customers in the booking phase and making them more likely

A mind that is stretched by to book directly through the hotel instead of going through other distribution channels such as
online travel agents.

a new experience can never go Post-stay, hotels can maintain contact with former guests by inviting them to exclusive events
at the hotel based on guests’ personal interests, or send guests personalized souvenirs, such as
photos taken during their travel.
back to its old dimensions. Exhibit 14: Accompanying the traveler along her/his journey

Oliver Wendell Holmes Meta search

Other distributor
(OTAs, TMC..) Social media

Brand web sites Reviews & 3rd party Loyalty program

sites (OTAs)

To Travel is to Live. Online universe Social influencers Website Community Emailing

Travel is the only A great way to learn DIGITAL and search and social media
Hans Christian Andersen
We live in a wonderful TOUCHPOINTS
thing you buy that about your country is to Email Social media Mobile app Online Surveys
world that is full of
makes you richer. leave it.
Henry Rollins
beauty, charm, and DREAMING DISCOVERING BOOKING EXPERIENCING SHARING
unknown author
To my mind, the adventure. There is no PHYSICAL Word
TOUCHPOINTS of mouth Travel advisors Hotel In-hotel Direct mail
greatest reward end to the adventures
= Experience
we can have if only
and luxury of travel If you think adventure Once a year, go we seek them with our Radio, TV, Press Call centers Out-hotel Experience
is to be able to is dangerous, try someplace you’ve
= eyes open. POTENTIAL TOUCHPOINTS OF HOSPITALITY ACTORS IN THE CUSTOMER JOURNEY
experience everyday routine; it is lethal. never been before. Jawaharial Nehru OTHER TOUCHPOINTS IN THE CUSTOMER JOURNEY
things as if for the Paulo Coelho Dalai Lama
first time, to be in Source: Oliver Wyman Analysis

a position in which
almost nothing is so
One’s destination is Travel is more than the seeing of sights;
familiar it is taken
never a place, but a new it is a change that goes on, deep and
for granted. way of seeing things.
25
permanent, in the ideas of living.
Bill Bryson
Henry Miller Miriam Beard
 During their stay, which is the core focus of hospitality actors, the first step is to ensure the or combining gastronomy with culture by visiting La Colombe d’Or Hotel and restaurant near
traditional hospitality offering through quality service, rooms, and facilities. In moving beyond Nice in France, which features the work of noted artists, such as Henri Matisse and Pablo Picasso.
that initial commitment to excellence, hospitality players need to harness the paradigm shift from
product to experience, a process that involves starting from the guest’s key interests. To optimize its resources, a hotel should determine which experience area to invest in to create a
(See Exhibit 15.) unique and differentiated value proposition. It may focus on one to three areas that constitute its
core identity and then provide adjacent offers on a subset of other areas directly and/or through
Each of the experience areas provides a range of opportunities that hotels can seize by partners to satisfy a wider range of customers. (See Exhibit 16.)
positioning themselves proactively. Take gastronomy: On average, 25 percent of travel spend
is food and beverage related—and that reach as high as 50 percent in the case of culinary tours. Selecting these experiential areas means considering a range of factors, such as:
Indeed, more than 75 percent of American leisure travelers consider a culinary activity a strong •• The current image and positioning of the hotel: luxury vs. economy hotel, family vs. business
motivation for visiting a destination and 52 percent of millennials list food experiences as the top
•• The environment and surroundings: climate, nature, and shops
reason to travel, according to the World Food Travel Association.
•• Customer preferences
Gastronomy increasingly is becoming experiential, not simply because of the growing fascination •• Competitive intensity and ability to keep pace with other hotels or other type of actors
with authentic local cuisines but also as a result of a rise in alternative diets. As such, culinary
A luxury hotel or resort that wishes to offer a state-of-the-art wellness experience may invest in
tourism has thrived, with trips that may involve excursions to sustainable farms, farm-to-table
a fitness pavilion (in partnership with a sports club) or in a family-friendly wellness spa. It may
cuisine, cooking sessions with local chefs, and much more for foodies who desire to have a
also provide alternative medicine services (featuring sessions with nutritionists, therapists, and
cultural and interactive experience. Hotels may position themselves in various ways, such as
doctors), meditation spaces, and a diagnostic center.
arranging an event where customers can visit a kitchen/chef, leveraging authentic local products,

Exhibit 16: Segmenting customers by their interests

Exhibit 15: Examples of experience areas for travelers
Health
& Wellness Social impact Fashion & Style Beach holidays

Segment 1
Health & Wellness Sport & Adventure Fashion & Style High level of
customer interest
Segment 2

Medium level of
customer interest
Segment 3

Unable to
Gastronomy Beach holidays Art & Culture compete Low level of
Other customer interest
elements (competitors
to consider and other
businesses)
Core area of focus

Areas of Area to be covered

focus for
Social impact Business Nature & Heritage Hotel X
& Entrepreneurship Low priority

Source: Oliver Wyman Analysis Source: Oliver Wyman Analysis

Copyright © 2019 Oliver Wyman 27

 EXPERIENTIAL OFFERINGS CAN LEAD TO POSITIVE OUTCOMES Airbnb leverages locals’ experience and knowledge to provide travelers unique and authentic
experiences that cover all types of interests. (See Exhibit 17.) Today, Airbnb is offering more than
Given that brand standards or “classic” experiences are deficient in meeting the needs and 15,000 different experiences through its Experience platform, and the growth of the platform has
desires of tomorrow’s traveler, industry players need to rethink their value proposition to make it been breathtaking: in 2017, bookings grew by 2,500 percent vs. 2016, with more than 50,000
revolve around a true and unique experience that encourages and cultivates what matters most to hosts offering Experiences.
the customer.
The study of experience-oriented hotels confirms the strength of this value proposition,
This involves more than just picking the right experiential areas to focus on. It calls for starting from demonstrating the robustness of the economic model and the improvement it brings to the
the experience and offering activities and platforms to fulfill and satisfy the traveler, whether it is customer relationship. Indeed, customers are willing to pay more for these types of experiences,
to unwind and connect with the local environment and communities in an authentic, smart, and enjoy them for a longer time, and become loyal to the brand. (See Exhibit 18.)
convenient manner or to refocus on unique and personal interests.
To effectively deliver their new value proposition, the operating model of players needs evolve to
Traditional customer segments, which typically have relied on price, origin, and demographics, are enhance the centricity around the customer and her/his interests:
no longer sufficient. Industry actors should instead seek to further group their customers by shared Marketing: brands need to be associated with specific and well-defined types of experiences.
interests and deliver an adequate proposition to each group. Brands’ differentiation must be based on the experience offered to the customer
Pricing: products, services, and experiences should be offered as packages aligned with
A number of companies are moving towards experiential travel and are proposing unique offerings
customers’ interests
meeting their customers’ core interests. The Icehotel in Sweden puts guests into extreme weather
conditions and offers thrilling and local activities (such as cross-country skiing, survival courses, and Distribution: platforms need to be designed to integrate the brand’s qualities and services.
New distributions channels related to customers’ interests should be leveraged
more) to attract adventure seekers. The Marriott Renaissance in New York attracts design and art
lovers by immersing its guests into a multi-sensory interactive and digital experience in which the Partnerships: experiences can be fueled through partnerships with local companies and people
hotel comes to life and is continuously transformed. Me to We is an innovative social enterprise that offering authentic and exceptional activities
offers travels for people who want to have a positive impact on the world, providing them with an Customer engagement: customer’s interests must become the pillar of a bespoke
opportunity to volunteer on a development project, such as building a school for a community. customer relationship
Human resources: job positions must revolve around the community and the delivery of
Exhibit 17: Airbnb’s Experiences experiences: HR people must move towards becoming experience curators who can ensure
that customers are have high-quality experiences, CRM managers must become community
“Front Range “Forest Therapy “Leave your Mark:
Mountain Adventure” Wellness Experience” Street Art Workshop” managers, animating the community and understanding its expectations, while staff members
become concierges, providing personalized services to customers.

Boulder Wicklow Vienna

Exhibit 18: Case studies of improved performance for wellness resorts and adventure travels

WELLNESS RESORTS ADVENTURE TRAVELS

“Tea Ceremony in Hidden “Explore the fashion
Vintage House” design scene” 5-7 nights average length of stay 8 days average length of stay
AIRBNB 40-50% of repeat guests Higher repeat guests rate
Tanjung Tokong NYC
+53% of spends vs. average traveller +60% of spends vs. average traveler
(international traveller) (young traveler)
“Dubai entrepreneurs “Night sky star gazing
networking meeting” “Plastic Fishing” and astrology” 74% of direct booking with no booking 71% are making arrangements on
through OTAs or GDS their own (American travelers)

Dubai Amsterdam Füssen x2.5 RevPAR vs. traditional similar resortst

Source: Global Wellness Institute, Horwath HTL Health Source: UNWTO Global Report on Adventure Tourismt
and Wellness
Source: Oliver Wyman Analysis

Copyright © 2019 Oliver Wyman 29

 CONCLUSION
The growth of tourism worldwide is being accompanied by new trends, such as digital
experiences, social media, and the sharing economy. These shifts will all have an important
impact on tourism and on the industry, as will the challenges of sustainable development and
heritage preservation, which are becoming increasingly complex. At the same, however, the
challenges represent opportunities for industry players to define their unique value proposition
and develop truly differentiated offerings.

We are witnessing an “Experience Revolution” with expectations from travelers that go far beyond
products and traditional services. To satisfy the growing aspiration for truly inspirational experiences,
travel actors need to start from the key interests of the guests to develop the right offers.

Hotels of the future will become platforms where the individual comes to meet his inspirations
and focus on what matters to her/him or their community. The study of these new offers
confirms the strength of the value proposition and the robustness of the economic model,
which also allows hospitality actors to drastically improve their relationship with the customer.
Hotel operators need to adapt to be able to meet guests’ expectations in alignment with their
community of interests. Marketing, pricing, distribution, partnerships, customer engagement,
and human resources will also need to evolve accordingly.

The “Experience Revolution” represents a great opportunity for tourism actors that can successfully
adapt and stand out by providing unique quality experiences to attract global travelers.

Copyright © 2019 Oliver Wyman

ABOUT OLIVER WYMAN
Oliver Wyman is a global executive management consulting firm. With offices in more than 50 cities across 30 countries,
Oliver Wyman combines in-depth knowledge across business lines with recognized expertise in strategy, operations, risk
management, and organizational transformation. Its 4,700 professionals help their clients optimize their business, improve
their operations and their risk profile and accelerate their organizational performance in order to seize the most attractive
opportunities. Oliver Wyman is a subsidiary of the Marsh & McLennan Companies Group [NYSE: MMC].
For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.

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AUTHORS
MATTHIEU DE CLERCQ GUILLAUME THIBAULT ADAM HJIEJ
Partner Partner Associate
[email protected] [email protected] [email protected]

ANSHU VATS BRUNO DESPUJOL

Partner Partner
[email protected] [email protected]

www.oliverwyman.com

Copyright © 2019 Oliver Wyman

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