How the Millennial Traveler is Redefining the Hospitality Industry - Research Paper

Introduction

Millennials consider vacations or holidays as essential experiences next to other psychological needs. Consequently, traveling today is no longer an indulgence in extravagance but a necessity. Therefore, the hospitality industry owes its success today to the increasing need to travel among the millennials. Indeed, the hotel industry is estimated to be of $5.3 million value in bed revenue and is expected to grow 7-8% annually (Verissimo & Costa, 2018). The expected growth was also captured by a report from the World Tourism Association (UNWTO). In collaboration with Staywyse, UNTWO in 2016 projected that the number of international youth trips would increase to about 300 million by 2020. This number is over 60% higher the numbers of trips witnessed in 2010 (Hickey, 2017). The numbers prove that the hospitality industry is currently experiencing an influx of growth due to the modern Generation Y customer.

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The rampant growth in the number of travels also provides opportunities for investors and operators. For instance, London is estimated to have around 2.8 hostel beds per 1,000 overseas visitors aged 16-34. The number of the hostels is even more significant in other European countries like Germany where is estimated that within Berlin there are 11.2 hostel beds for international visitors (Hickey, 2017). In the past hostels were meant only for students but nowadays they are being reconstructed into private rooms with facilities such as bars to accommodate millennial visitors (Verissimo & Costa, 2018). While most hostels maintained their status as non-profits, the increased growth of millennial travelers has seen them being reconstructed by investors. For instance, Hosteling International is the first and largest youth hostel association which has over the years maintained its status as a non-profit (Verissimo & Costa, 2018). However, with time the association has also attracted investors who have branded most of its hostels to offer the same services as those in hotels. The shift by hostels into the mainstream has boosted the hospitality industry because their price does not differ so much from that of hotels (Hickey, 2017). For instance, hostels in Portuguese has been gaining international recognition due to their excellence in offering similar services and fair prices as hotels (Verissimo & Costa, 2018). Therefore, millennials have fundamentally redefined the status of hostels and incorporated them into the mainstream hospitality industry.

Millennials were born at a time leisure options were increasingly available in society. As a result, they tend to spend more of their money on traveling than any other generation (Bednall, Valos, Adam, & McLeod, 2012). One previous study found that 72% of millennials would instead go on a dream holiday than buying a brand new car (65%). The study also found that most of the younger millennials (42%) suggested that their motivations for going on a holiday are to reduce stress while 34% were motivated by the need to find more excitement in life and only 25% wanted to spend quality time with their partner (Expedia, 2016). Consequently, the hospitality industry is increasingly reconsidering its services to offer these three experiences and settings including serene environment to help overcome stress, adventurous settings for fun, and romantic setting for time alone with partners (Bednall et al., 2012). Henceforth, the millennial has redefined travel as an activity not determined by class or for the rich as historically perceived but an activity for fun, escaping the harsh realities of life and reconnecting with loved ones.

Millennials have also redefined international travel. In the past, traveling overseas, especially Europe, was a thing for the affluent families who could afford to pay for air tickets and the luxurious hotels. However, millennials have proved that anyone can travel overseas on a budget (Verissimo & Costa, 2018). The United Nations has estimated that 20% or 200 million of all international tourists are young people (Machado, 2014). Furthermore, these travelers bring in more than $180 billion in annual international tourism revenue (Machado, 2014). Therefore, the millennial traveler is the most significant contributor to international travel revenue. Most millennials will not only travel to international destinations for a holiday but also to volunteer, learn a foreign language, or even work part-time (Verissimo & Costa, 2018). Hence, millennials are redefining the meaning of international travel by showing a preference for meaningful experiences rather than typical vacations. Those traveling international also stay longer to experience another culture. Thus, a millennial traveler abroad will be more likely to visit a remote place than major cities (Expedia, 2016). Previous research has found that millennials are spending less time in major cities or gateway destinations and instead choosing to visit remote areas, staying in hostels instead of hotels, and backpacking instead of sunbathing (Machado, 2014). Due to this, the hospitality industry aboard has been making efforts to expand or open other branches in remote areas to accommodate the millennials traveling to these places.

The hospitality industry has grown dramatically owing to innovative technologies. With innovations such as mobile self-check-in and check-out, online booking, phone key cards, and voice protocols, the hospitality industry has been revolutionized (Bilgihan & Nejad, 2015). These innovations have taken place to attract millennial customers who are technologically savvy and socially connected people. Hence, the millennial traveler has redefined the hospitality industry by making services more comfortable, more contemporary, and user-friendly (Bilgihan & Nejad, 2015). Another emerging innovative strategy within hostels is the idea of a collaborative or sharing economy. Sharing economy is the process of utilizing the available resources such as hotels rooms and cars more efficiently (Bilgihan & Nejad, 2015). The significant aspect of sharing economy is to share assets for the economic, environmental, and social benefit (Psarros, Rinne, Jordan, & Pastras, 2015). The sharing may include car sharing or room sharing, where this generation will share rides, meals, and rooms in order to save money. Subsequently, there has been an increased growth of applications like Airbnb and BlaBlaCar offering sharing services (Psarros et al., 2015). With such applications, the hotel industry has experienced an increased growth of customers.

How Millennials' Lifestyle Influences the Luxury Hospitality Industry

Millennials, also known as Generation Y, are the demographic cohort defined as being born between 1980 and 2000 (Jennings, Cater, Lee, Ollenburg, Ayling & Lunny, 2010). Given this age group (19-39 years), millennials are amongst the most socially connected, digitally savvy, and demanding individuals. Most millennials are either born as a one-child or into blended or complex families. Consequently, this demographic group strives for acceptance from their peers with the aid of technology connectivity (Jennings et al., 2010). Hence, technology and the need to 'fit in' plays a significant role in the lifestyle of millennials. Most will, therefore, when looking for or booking hotels be concerned about internet connectivity because they want to maintain their social media presence least they disconnect with peers. Apart from being influenced by technology, millennials' lifestyle is also impacted by contemporary consumer culture. It means that the millennial traveler will most likely be on a budget when traveling but wants to get the best experience out of their travel. According to previous studies, most Generation Y-ers visiting places abroad were found to either have no permanent employment or if already employed their position on the career platform was either low or average (Jennings et al., 2016). Subsequently, the millennial travelers were on budget-oriented forms of travel (Jennings et al., 2016). Most millennials lack considerable purchasing power since most are either unemployed or just getting their career started. However, millennials buy in masses, and this creates a new brand of luxury goods; those that are less expensive but offer the best experience (Stepien & Lima, 2016).

Luxury has been described as the authenticity expressed in a product owing to its design or material. Hence, a product with such exceptionality comes along with a high price, and only affluent shoppers can purchase it (Stepien & Lima, 2016). However, the millennial consumer has changed the concept of luxury drastically. Millennials are more concerned with a product's ability to connect with social values seeing that they are highly influenced by social media acceptability. Generation Y makes up the most substantial part of consumers in the global market, and this necessitates luxury brands to develop products that fit the needs of this generation. According to previous studies, luxury brands need to develop their products by engaging digitally savvy, socially aware, and time-sensitive millennial consumers (Yazici, 2016). Therefore, their budget may be low, but the aspirations of millennials are high. Given this, the hospitality industry, in order to attract millennial customers, has had to personalize travel experiences to connect luxury to social value instead of cost (Yazici, 2016). With the global luxury market being estimated at 1 trillion euro in 2016 and expected to grow in the years to come, the hospitality industry is also estimated to grow drastically (Horwarth HTL & Soul Luxury, 2018). Nowadays, the luxury hospitality industry is highly influenced by technological advancements and customer shifting mindset about luxury. All these factors are those attributed by the lifestyle of millennials and heavily relies on social media and other digital tools as well as budget-oriented but (Horwarth HTL personalized experiences & Soul Luxury, 2018). The modern aspect of luxury in hospitality, therefore, relies upon the traveler's search for an emotional experience in traveling.

How Technology and Environment Determines Millennials' Choice of Luxury Hospitality

Technology plays a significant role in contemporary society. Because millennials grew up around computers, internet, and mobile devices, they are considered to be highly socially connected, and tech-savvy (Ressel, 2016). Thus, the millennial traveler will rely on technology to discover, book, and make payments as well as to conduct other transactions during their stay in a hotel. There has been a growing trend in the hospitality sector that of enhancing the experience over materialism. Consumers do not want to pay for more whereas they do not connect the product or service to their emotional and social states (Yazici, 2016).

Most importantly, consumers especially the Generation Y-ers want to connect their digital capability to their travel experiences. As a result, the use of mobile phones in discovering and booking hotels, flights, or trips has been on the rise (Athwal, 2017). Furthermore, Generation Y of travelers utilizes social media to compare brands. Comparison helps the millennial traveler decide on which hotel or destination is similar to their preferences or needs. For instanc...