Global tourism on the rise, though industry grapples with challenges

The global tourism and travel (T&T) sector will contribute around $16 trillion to the world’s GDP by 2034, when it hits 30 billion trips yearly. That is according to a report from the World Economic Forum, in collaboration with Kearney and the Ministry of Tourism Saudi Arabia.

After finally recovering from the huge blow dealt by the pandemic, tourism and travel are now presented with big opportunities for growth in an increasingly connected world. It was estimated that the T&T sector accounted for about 10% of the global GDP in 2023. The impact of the sector extends beyond airlines and hospitality into a wide range of other areas like food services, retail, and an array of local businesses.

T&T is expanding about 1.5 times faster than the rest of the global economy, though continued success will hinge on whether companies and governments can grapple with big challenges related to climate change, persistent labor shortages, and demand for better infrastructure.

The Covid-19 freeze on travel dealt a deadly blow to the T&T sector, with total GDP contribution nearly halving from 2019 to 2020. By last year, the sector was back to pre-2020 levels and GDP contribution is now expected to continue growing at a rate of over 4% per year.

If all goes according to plan, the sector could end up contributing $16 trillion in GDP by 2034. This growth can materialize in different ways and, in the best case scenario, there is great potential for the sector to contribute positively to cultural understanding, inclusion, and regeneration.

The overall economic impact of the T&T industry varies widely among countries at different stages of development and economic diversification. For example, tourism-centric economies like the Bahamas, Seychelles, and other vacation hotspots depend heavily on visitors. They have great natural assets, but are very vulnerable to economic downturns or natural disasters.

Emerging tourism destinations like Saudi Arabia, Indonesia, and Sri Lanka, among others, are projected to see more and more tourism in the future and are actively investing in infrastructure. Many of these countries are likely to continue shifting their economies towards tourism, but currently face issues in areas like workforce development.

Then there are the diversified economies that already have strong tourism sectors. These include large economies with strong tourism sectors like France, Turkey, Japan, the United States, and others. The contribution of the T&T industry to GDP is well balanced, though tourist destinations in these countries are concentrated in specific locations (Paris, Istanbul, Tokyo, and New York City, for example).

Asia is emerging as a major driver in GDP growth in the future of the travel and tourism industry. Direct contributions from the sector to national GDPs are all over 7% in Asia, with countries like China, South Korea, Thailand, and Japan clearly dominating.

This accelerated growth could soon position Asia as one of the world’s tourism hotspots. Africa comes second in the list of top T&T contributions to GDP. With destinations like Tanzania, Kenya, Morocco, Egypt, and the Seychelles attracting growing numbers of visitors in these relatively low GDP countries, it is no wonder why.

Challenges from all sides

Though these projections are positive for industry players, whether the industry will see consistent growth going forward largely depends on whether the looming threats of global challenges can be successfully navigated. These threats are complex and seem to come from all sides.

For example, air travel is one of the largest and hardest to abate contributors to carbon emissions. Tourism is also a major strain on natural systems around the world, accounting for about 10% of global energy consumption and 7% of solid waste, according to the study.

Global risks like geopolitical tensions also threaten to disrupt the industry. For example, air travel has routinely been disrupted over the past few years in large parts of the Middle East since the conflict in Israel/Palestine and fighting with Hezbollah and Iran escalated periodically.

Another area of concern is whether infrastructure and investment can keep up with T&T growth. There will need to be additional regulatory changes to expedite development in order for the industry to reach the projected 30 billion trips by 2034.

The reality laid out by the report is that without decisive, coordinated action, the sector could face up to $6 trillion in revenue loss by 2030 from all types of disruptions.

“Tourism is a powerful driver of jobs, culture and economic growth around the world. As the industry grows to meet the needs of billions more travellers, it also needs to evolve,” said Bob Willen, managing partner and chairman at Kearney.

“That means using technology responsibly, supporting workers and small businesses, protecting the planet, and making sure local communities truly benefit. The principles in our report lay out a practical path forward from investing in greener infrastructure and building a more inclusive workforce, to preserving cultural heritage and planning for future crises.”