Travel marketers who have been paying attention to the world around them will not be surprised to hear that a large portion of the target customer base is now composed of millennials. Economists would attribute a large part of this (over the long term) to deregulation, as well as a "real" decrease in airfares relative to the incomes. Yet in recent times, the drastic increase in the quantum of information at their disposal has also contributed significantly to this trend.
Largely on account of this influx of millennials into the demand side of the market, customer attitudes are evolving towards a mixture of seeking convenience, pursuing experiences and spontaneous decision making. Clearly, there is some level of heterogeneity in the kinds of experiences they seek, as well as what they can afford.
Changing approach to savings
Millennials (at least the relatively affluent ones) do save their money, but they do so with the objective of financing their experience creation activity – such as leisure travel and fine dining – as opposed to creating a cushion for their post-retirement life. In stark contrast, baby boomers and Generation X prioritize retirement funding and building/buying a house as the key goals for their savings. But those goals are looking more distant these days, as some estimates suggest that saving for a house in an expensive neighborhood will take a typical college educated professional as many as 50 years.
Having witnessed a significant recession, as well as being constantly warned about impending ones, might have taken a toll on the planning horizon of millennials. Therefore, their priorities are changing over time, in terms of what they want to achieve in life and the milestones they look forward to. It is, after all, easier to save up for a vacation than for buying a house, while it is not immediately clear which one makes you more happy. The former provides instant gratification, which is at the core of many marketing campaigns targeting millennials. Hence, for a typical millennial, travel is a clear winner in priority.
Convenience and spontaneity in choices
In an earlier blog post, I had explored how millennials literally shape the mobility market for travel and also detailed four keys to unlock that puzzle. In all aspects of their consumer life, millennials will stick with a brand as long as (and only as long as) the value proposition is clear to them – and that could mean lower price, ease of use or something as tangible. Travel is no different - while 70% of travelers use smartphones for travel-related research, around 88% of users would have no hesitation in moving away from an app or website which doesn't satisfy their needs, according to Think With Google, the research arm of the internet giant.
In keeping with the spontaneity associated with this generation, around 85% of leisure travelers these days decide on their schedule of activities only after reaching their destination. This conclusion is further strengthened by a very noticeable 30% increase in searches originating from smartphones which are located in hotel properties! Further, research suggests that travelers today consider access to WiFi on flights to be the most important feature, ahead of even timely arrivals and food! At least one airline is now offering travelers the opportunity to bid for empty neighboring seats on flights, consistent with the pursuit of convenience and comfort.
How must the industry respond?
Seeing that the millennial generation is willing to spend money on travel based on the above considerations, it is up to suppliers to facilitate this, through implementing appropriate financial models. The focus must be on presenting an attractive price tag for a travel product, while giving enough leeway to enhance the experience with a sufficiently broad portfolio of ancillaries for those who seek it.
Each customer may be viewed as a potential ambassador for his/her peer group and must be incentivized to share details of their travel on social networks. After all, recent innovations like PhoTra is closing the gap between travel-based imagery and actual travel itineraries. Incentives can range from something as simple provision of photo ops to added opportunities for loyalty points and enhanced rewards. This will enable greater penetration into each group of customers, who may be considered to have a high-likelihood of purchase by virtue of being in that peer group.
In essence, millennials tend to set their own rules when it comes to consumer tendencies, considering their broad knowledge of the world and large appetite for experiences. Given their age ranges and income profiles, they will continue to grow their share of demand in the travel market for many years to come.