The travel industry post-Covid is back, and proving to be an exceptionally resilient industry — so much so that some consumers are prioritizing it nearly as much as eating. The industry grew 6% over a recent 12 month period, according to McKinsey’s 2024 travel report, even when adjusted for inflation, and 33% of consumers said they planned to splurge on travel, just behind dining out and groceries.
Yet the travel gap is widening between income brackets. Attain transaction data from 2024 shows that consumers making under $50K a year under-index for all travel category spending, while those making over $50K over-index. Younger generations continue to drive the trend to spend on experiences rather than commodities and convenience.
As inflation took hold over the last few years, and low-to-middle income Americans felt the squeeze most acutely, higher income individuals pursuing luxury travel have kept the industry flush with cash. Younger generations like Gen Z and Millennials continue to travel as a hobby and way of life, and are much more likely to cut other expenses before cutting their travel budget.
In spite of generally lower earnings, younger generations are the consumers driving the international travel boom. According to McKinsey, Gen Z and Millenials took around two domestic and international flights in the past year, whereas Gen X and Boomers had on average two domestic flights and closer to one international flight. Younger generations are also more likely to skimp on convenience such as non-stop flights in favor of spending on experiences, whereas older generations will pay more for ease while pulling back on experiences.
In terms of airline choice, when comparing Attain transaction data on budget airlines to typically more expensive operators, there was no substantial difference in demographics such as age and household income. This indicates that flight schedule is more influential on airline choice than supposed savings. Additionally, Attain data shows the difference in average transaction amount between budget and traditional airlines for the last 12 months was only $8 – coming in at $126 and $118 respectively.
Rental car prices have been astronomical since Covid. Compared to 2019, average prices are still up nearly 30%, though they are dropping slightly year over year. According to Attain data, the car rental market generally attracts an older market, though the highest indexing generation in 2024 was 35-44 age bracket.
When it comes to where to stay, there are massive differences in customer base for the hotel market and homestay rentals like Airbnb. Predictably, Attain data shows Airbnb customers are younger, make less money and travel more frequently. Though Airbnb might be thought of as a more affordable option, the average Airbnb transaction amount was $354, compared to an average of just $102 across a sample of Marriott, Holiday Inn, and Hampton Inn for the last 12 months. However, this could be a function of duration of the stay and number of people on the reservation, which is not reflected in transaction data.
The travel industry is undoubtedly in flux, and as it shakes out it seems like it could be dominated by a young market seeking experiences and a higher-income market sparing no expense on luxury. This could mean we see less available options for family-friendly trips to the beach, but more food tours in Mexico City and luxury trips to Napa. This will only further divide income brackets and continue to transform the travel industry.
