A cruise to Antarctica with a wildlife specialist. An expedition to Incan ruins led by an archaeologist. A tour of Florence guided by a medieval historian. The leisure travel sector that organizes those once-in-a-lifetime trips is about to enjoy some very good years.
Fueling the travel boom will be the projected growth during the next decade of the 55- to 74-year-old age segment, a group that tends to indulge in such vacations more than any other. Before reaching middle age, people spend most of their money acquiring possessions. When people reach their 50s, many start to think about going to places they have dreamed about but have never visited. Once consumers have bought most of the things they want, their attention turns to buying memorable experiences.
This quest for the unusual signals opportunity for the travel industry, which has suffered since September 2001, when millions of fearful Americans decided they were not going anywhere. In the absence of further terrorist attacks, the forecast is for a boom in at least one segment of the industry — unique vacations.
Considering the way airlines and lodging firms have been slashing travel agent commissions, combined with the increase in bookings on travel Web sites, it would seem to be a time of gloom for the travel agency business. But demographic trends suggest there will be a dramatic increase in the number of people with the inclination — and the money — to take longer, more expensive trips. Many of these affluent consumers would likely be happy to pay an agent to ensure a well-planned, worry-free holiday.
Since such vacations are not cheap, and they usually take longer than a weekend, the best customers are most likely households with discretionary income and free time. The two population segments that best fit that description are those ages 55 to 64 and 65 to 74. These two groups are not large and have grown slowly over the past decade. Households ages 55 to 64, for example, numbered only about 14 million in 2000 and increased at the same rate as all households, about 1.5 percent per year. By the end of the 1990s, this age segment represented the same percentage of households as it did at the beginning of the decade, 13.5 percent. Households ages 65 to 74 are even fewer in number — 11.5 million in 2000 — and did not increase at all during the past decade. So that segment is now only 10.9 percent of all households. As of 2000, people ages 55 to 74 represented about 1 in 5 of all adults and about 1 in 4 of all households.
However, when it comes to spending on travel-related goods and services or their future growth prospects, these two age segments will be far more important to the leisure travel industry than their numbers would suggest. Between now and 2010, the 55- to 64-year-old age segment will grow faster than any other age group, averaging about 5 percent per year. Households ages 65 to 74 will likely increase at a steady 1.5 percent per year, until the first Baby Boomer turns 65 in about nine years, and then it will grow at about 5 percent per year.
During the next 5 to 10 years, a prime target market for any leisure-oriented travel agency should be households ages 55 to 64. According to the Bureau of Labor Statistics (BLS) 2000 Consumer Expenditure Survey, households in that age cohort now spend about $17 billion a year on travel-related goods and services. About half of that pays for transportation by air, train, boat or rental car.
Of course, not every household in that age group spends freely on travel services, but the average expenditure is about $1,200 a year, according to the BLS. The highest income segment of this age cohort — those earning $100,000 per year or more — now spends an average of more than $6,000 a year on family trips. A 50 percent increase in the size of this age group, by itself, would be very beneficial to the leisure travel industry. But this age group is also likely to have an increase in income as well, because of the influx of affluent, well-educated Baby Boomers.
The Census Bureau's 2000 survey found about 2.2 million households in the 55 to 64 category earning $100,000 a year or more. The same survey also found 4.7 million households earning that income in the 45- to 54-year-old age group. If we assume that most of those 4.7 million Baby Boom households will maintain their six-figure income during this decade, then the segment of households ages 55 to 64 that spend the most on leisure travel will probably double its earning power by 2010.
What might this mean for travel agents, one of the hardest hit subsets of the travel industry? Some airlines have eliminated agency commissions, and many larger lodging firms have reduced commissions. Contrary to appearances, these changes may be the best thing that ever happened to travel agents. Getting paid a fee by the traveler instead of a commission by the airline or hotel should shift the focus of travel agents to trying to understand what the customer wants, instead of trying to please suppliers. Travel agents who are able to identify the segment of the traveling public they can profitably serve and who can offer those customers not just a trip, but the experience of a lifetime, should not have a problem with their bottom line.
The travel agents likely to prosper during this decade, despite the cutbacks, will be the ones who realize that they are no longer agents of the transportation or lodging companies but are now in the business of providing a growing number of older and more affluent travelers with what they really want: unique and memorable experiences.
Peter Francese is the founder of American Demographics. He can be reached at [email protected] .
THE SENIOR TRAVEL MARKET
Households ages 55 to 74 spend more on travel services than their income would suggest.
|HOUSEHOLDS AGES 55 TO 64||HOUSEHOLDS AGES 65 TO 74|
|Number of households, 2000||14.25 million||11.50 million|
|Percent change, '90 to '00||+ 15%||0%|
|Percent change, '00 to '10||+ 50%||+ 15%|
|Average annual travel spending per household*||$1,200||$1,100|
|Percent above/below all households||21% above||11% above|
|Average household income||$62,200||$40,700|
|Percent above/below all households||9% above||29% below|
|*Includes spending on food, lodging, transportation and entertainment|
|Sources: Census Bureau, Bureau of Labor Statistics|