SOURCE: The Boston Consulting Group
BOSTON, MA--(Marketwire - Mar 18, 2013) - The Millennial generation will be the core customers of airlines, hotels, and travel companies in the next five to ten years. Their spending on business flights is projected to reach nearly 50 percent of the total by 2020, and their leisure-travel activity will have a major impact on the travel and tourism industry, according to a new report by The Boston Consulting Group (BCG).
Forward-looking travel and tourism companies can earn the business and loyalty of Millennials (16- to 34-year-olds) by acting now to understand and address their unique preferences and needs.
"Traveling with Millennials," a new report based on a survey conducted by BCG's Center for Consumer and Customer Insight, examines the Millennial generation and its approach to business and leisure travel. The report is BCG's third publication in a series on Millennials, developed in partnership with Barkley and Service Management Group. The series highlights the growing influence of Millennial consumers and includes findings on their interaction with brands, as well as factors that shape their habits and preferences.
"In as few as five years, Millennials will enter their peak earning, spending, and traveling years and surpass the baby boomers in business flight spending," said Christine Barton, a BCG partner and lead author of the report. "The window of opportunity for businesses to understand the unique travel approach of this generation and gain its mind share is closing rapidly. Companies will be more successful if they determine an effective Millennial strategy now."
"Traveling with Millennials" is part of BCG's fiftieth anniversary Game Changing program to help leaders and their companies capitalize on the opportunities created by the seismic shifts in the global economy. The report relates to an issue that BCG calls the New Growth-Value Equation, which stresses the need for companies to refocus on strategies for profitable growth that simultaneously lay the foundation for long-term value creation.
How to Build an Effective Millennial Strategy
Companies must address a full spectrum of considerations along a continuum of time, effort, and risk when developing a strategy for meeting Millennials' needs. At one end of the spectrum are near-term marketing, branding, and communication tactics that will begin to engage Millennials, shaping their perceptions and preferences. Companies must also develop bespoke distribution strategies and tactics and, in the longer term, consider more capital-intensive projects that align with Millennials' habits and preferences.
BCG lists the following among the tactics that travel and tourism companies can employ to meet the needs and preferences of Millennials:
- Segment customers to identify the segments that are most engaged in business and leisure travel and those that are most profitable; adjust communications accordingly.
- Rethink loyalty programs and partnerships to offer relevant packages, promotions, and rewards.
- Design aspects of the traveler experience -- including food and beverage offerings, in-flight entertainment, check-in processes, and airport amenities -- with Millennials in mind.
- Consider aircraft design, product development, and retrofit decisions, as well as preferences related to seat size, decor, legroom and headroom, lighting, air quality, Internet connectivity, and charging stations.
Millennials' Travel Preferences Differ from Those of Non-Millennials
According to BCG, Millennial travelers are not a wholly homogeneous group. They comprise distinct segments, including business travelers and leisure travelers. The BCG study found several distinct characteristics of Millennial business travelers:
- Although Millennials travel less for business overall, they spend approximately the same amount on total business flights per year as non-Millennials (ages 35 to 74).
- The loyalty program benefits that Millennial business flyers desire are different from those desired by those who fly for leisure and non-Millennials, and overall Millennials are less likely than non-Millennials to use airline loyalty programs or credit cards.
- Millennial business flyers are more likely to add one more leisure trip per year than the average business traveler who also flies for leisure, and they express more interest in traveling internationally, using low-cost carriers, and obtaining discounts and airline packages.
BCG found that, in many cases, the differences in Millennial and non-Millennial leisure travel reflect life stage factors such as discretionary income, family, job demands, and vacation time:
- Half of Millennials take four or more overnight leisure trips per year, compared with more than 75 percent of non-Millennials.
- Millennials are more likely to travel for leisure in organized groups, with extended family, or with friends.
- Millennials are far more interested in international travel than non-Millennials.
- Millennials use travel apps on their smartphones more often than non-Millennials and rely more on user reviews, experiences, and online content when booking travel.
Companies Must Act Now to Gain Mind Share
Members of the Millennial generation are already engaging with brands, forming perceptions, and developing travel habits and preferences -- all nascent tendencies that will solidify as Millennials age. In the U.S., they value diversity, embrace a global perspective, and are open to new experiences. These characteristics are good news for the travel and tourism industry.
Given the size and certainty of the Millennial opportunity and its rapid approach, companies must evaluate their position along the continuum with regard to their Millennial strategy, as well as where they need to be -- sooner rather than later.
A copy of the report can be downloaded at www.bcgperspectives.com.
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About BCG's Center for Consumer and Customer Insight
The Boston Consulting Group's Center for Consumer and Customer Insight (CCCI) applies a unique, integrated approach that combines quantitative and qualitative consumer research with a deep understanding of business strategy and competitive dynamics. The center works closely with BCG's various practices to translate its insights into actionable strategies that lead to tangible economic impact for our clients. In the course of its work, the center has amassed a rich set of proprietary data on consumers from around the world, in both emerging and developed markets. The CCCI is sponsored by BCG's Marketing & Sales and Global Advantage practices. For more information, please visit www.bcg.com/expertise_impact/capabilities/center_consumer_customer_insight.