Gen Z to help India's travel spending expand 9% a year: McKinsey Report

A new McKinsey report predicts India's travel spending to grow at 9% annually driven by strong GDP growth. Domestic air passenger traffic is set to double by 2030, boosting the domestic travel market to potentially become the world's fourth largest.

A new generation of travelers, buoyed by India's robust GDP growth of over 6% annually, is expected to drive a roughly 9% annual increase in travel spending, according to a new McKinsey report released on Monday.

This growth could propel India's domestic travel market to surpass Japan and Mexico, making it the world's fourth-largest by 2030, as outlined in the report titled 'The State of Tourism and Hospitality 2024'.

Domestic air passenger traffic in India is projected to double by 2030, supported in part by a state-subsidized initiative aimed at connecting underserved domestic airports. This initiative has shifted development focus from major metropolises like Mumbai and Delhi to rapidly developing smaller cities such as Chandigarh and Hyderabad.

After a 75% decline in 2020, the travel sector is on track for a full recovery by the end of 2024, according to the McKinsey & Company report.

The report also noted that despite longer travel distances between Asian countries, Asia's intraregional travel market is beginning to resemble Europe's. Intraregional travel currently accounts for about 60% of international trips in Asia, with this figure expected to rise to 64% by 2030.

A survey of over 5,000 travelers revealed diverse preferences, generational divides, and new traveler archetypes. Notably, 66% of respondents expressed a greater interest in travel now compared to pre-COVID-19 times, a sentiment shared across all age groups and nationalities.

Respondents also indicated plans for more trips in 2024 compared to 2023. The report highlighted that travel has become a priority for many, even amid economic uncertainties that complicate budgeting. Younger travelers, in particular, are enthusiastic about international travel.

"Only 15% of our survey respondents say they're trying to save money by reducing the number of trips they go on," the report stated.

"In 2023, millennials and Gen Zers took, on average, nearly five trips, versus less than four for Gen Xers and baby boomers," it said. "Millennials and Gen Zers also say they devote, on average, 29% of their incomes to travel, compared with 26% for Gen Xers and 25% for baby boomers."

More than one-third (35%) of the luxury travel market now consists of travelers with a net worth between $100,000 and $1 million, and 80% of the luxury leisure market comprises individuals under the age of 60, according to the report.

"Aspiring luxury travelers have their own set of preferences, so it's crucial for the industry to understand this growing segment. 68% of luxury travelers say loyalty programs are an important factor when choosing accommodations, compared with only 41% of mass travelers," the McKinsey report stated.