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The Economics Of Recreation Leisure And Tourism – Leisure spending in the US grew by 24% in the five years to 2017, while UK spending on leisure activities grew by 17% in the five years to 2018. Growth rates are significantly higher in emerging markets as consumer incomes increase and become more affordable. free time increases. Nowhere is this more notable than in China, where travel and entertainment’s share of the wallet doubled from 5.5% to 11% between 2011 and 2017.
The leisure sector generally includes travel, entertainment, sports and recreation, and restaurant/bar spending. It is highly aspirational and constantly evolving to respond to changes in consumer behavior and tastes. Out-of-home entertainment, health and wellness, and travel are notable areas of current spending growth. Leisure choices are increasingly focused on memorable experiences and building a personal story.
The Economics Of Recreation Leisure And Tourism
, L.E.K. Consulting explores the health and outlook of the new leisure economy through six macro drivers (see Figure 1) and explains the resulting investment themes.
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Tangible goods such as consumer durables and clothing have become cheaper and more globally available, often purchased online with free shipping. Reduced scarcity has increased the usability of many goods and reduced the satisfaction of shopping for more “stuff”.
As a result, consumers turn to experiments to fill the void. When combined with smartphone photography and social media posts, experiences become “social assets” and can create social status and envy in the same way tangible products like new jewelry did in the past.
Data from the US capture this shift in experience costs in a nutshell (see Figure 2). Similarly, research by Eventbrite shows that 78% of American millennials will now choose a desired experience over a desired product.
Many consumers now use social networks as their primary means of communication with their friends and community. Despite its recent PR woes, Facebook had 2.32 billion active users at the end of 2018. For many, social “feeds” have become a carefully curated exit story used to project a positive self-image to the world.
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Experiences that are desirable to others or deemed socially “worthy” (such as participating in causes or fitness), such as adventure travel or festival attendance, have become valuable social currency. Constantly comparing one’s life to that of others encourages lively holiday diets and wellness activities to reduce social pressure, and 40% of UK millennials now favor ‘Instagrammability’ in their holiday destination choices.
Also central to the maturation of the leisure economy is widespread access to detailed information and feedback, which significantly reduces consumer risk and broadens the scope of consideration sets.
Leading provider TripAdvisor offers more than 730 million reviews of more than 8 million hotels, restaurants, vacation homes and attractions and hosts more than 160 million traveler photos.
There are many niche information services within categories. In air travel, services like ExpertFlyer give consumers access to real-time flight load factors, allowing them to identify available seats and easy upgrades. There are also websites like SeatGuru, which has reviews of specific seats among airlines, and The Points Guy, which offers tips on frequent flyer points.
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In addition to information asymmetry, digital technology has removed many of the inefficiencies that previously hampered the leisure economy. Improvements in search functionality mean that consumers can quickly find the experiences they want, and advances in digital advertising have enabled efficient, narrow targeting of relevant leisure products. Self-order and checkout technology is also increasingly seamless – rapidly making physical storefronts redundant. Additionally, indoor inventory for airplanes, cruises, concerts, hotels, and more can be cleaned more easily.
These efficiency gains encourage innovation and contribute to the growth of more tailored offerings: Vacation travel offerings and channels are increasingly specialized (e.g., senior travel, adventure travel, gift box vacations, bespoke travel), niche groups and festivals are developing, and new fitness centers concepts are launched every month.
From a physical perspective, improved transport networks, air access and visa flexibility mean leisure options are increasingly global. Cheap, plentiful air travel allows holiday weekends to be spent on a different continent, making bucket-list and gap-year trips ever-expanding. It also means that sporting events and festivals can attract a wider customer base and local tourism can attract more markets.
In addition, low-cost and increasingly high-quality mobile networks allow consumers to stay connected and freely host rich media content. Global standard attractions (Disneyland, Eiffel Tower, etc.) are in high demand, and tourism is a desirable export category in almost every market (including North Korea), leading to steady improvements in visa access.
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The retirement of baby boomers is creating millions of consumers with more time and the means to enjoy it, including more money and better health than any previous retirement cohort. This cohort—in stark contrast to their parents—has considerable discretionary wealth, views retirement as a positive lifestyle choice, and has many active years ahead of it.
Among millennials, productivity gains in the workplace continue to slowly decrease the length of the average full-time work week, yielding precious new hours each year. In addition, transitions to the (generally time-poor) family life phase are delayed as consumers enjoy relief from past constraints (including increased independence, longer life expectancy, and improvements in fertility medicine) as consumers operate with multiple options. struggle with housing affordability. While property markets have not allowed the younger generation to build wealth equal to that of their parents, they have enough disposable income to afford leisure – within the 10-15% of Gen X in many Western markets.
L.E.K. observes a number of leisure investment themes supported by six macro drivers (see Figure 3). Each of these presents opportunities to the considered investor.
As music royalty streams decline and consumers seek authentic, shareable experiences, live events are increasingly important to the connections (and revenue streams) between artists and fans.
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Recent growth is evident. Live music attendances in the UK grew by 17% year-on-year in 2017, while music tourism spending grew by 19% (to £2.5bn) in the same period; Between 2010 and 2017, consumer spending on concerts in the United States increased nearly 90%. Coachella, the world’s largest recurring music festival, generated 21% year-over-year revenue of $114 million in 2017, and global festival patronage reached approximately 320. million people.
This shift is due in part to live event leaders AEG and Live Nation actively acquiring and corporatizing music festivals, moving them from risky, weather-dependent propositions to sustainable commercial products.
Camping meets the needs of the modern leisure economy consumer. Affordable, authentic and highly natural, this activity is highly shareable and offers great health potential. For this reason, it has become a popular investment class.
Innovation and premium in camping sites and equipment (‘glamping’, treehouses and cabins) is growing rapidly and helping to expand the base. It touches many asset classes. For example:
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Dozens of European camping parks, holiday villages and car manufacturers have invested in private equity in the past few years.
Theme parks also benefit from increased revenues and experience. According to the International Association of Theme Parks and Attractions, global theme park spending grew more than 5% in 2017, and attendance at the world’s top 10 theme park groups grew 8.6% to 475 million visitors in 2017.
Growth in the Asian market is particularly strong. Three of the top 10 global groups are Chinese, and China accounts for about 25% of major park revenue. Western brands are also involved; Attendance at Shanghai Disneyland reached 11 million in 2017, and Merlin Entertainments recently opened Peppa Pig World (also in Shanghai) and also signed its first Asian Lego World in South Korea.
As the role of specialty retailers in shopping centers declines, property owners are using the experience to help bolster and even rebuild visits. Recent developments in shopping centers have increased the space devoted to hospitality and experience from the traditional 10%-20% to 30%-40%.
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Family entertainment centers such as arcades, bowling and soft-play are responsible for shopping trips with children and are a bright growth point in the retail sector.
The search for new experiences and social trends away from booze-based nights in the adult hospitality space is stimulating the proliferation of activity-based food and beverage concepts, combining high-end pub offerings with group activities such as bowling, mini-golf and jogging. rooms.
Social media, the search for experiences, increased consumer focus on health and wellness, and rapid innovation in offerings have fueled the rapid growth of fitness club memberships in the Western world.
In the US, membership penetration is currently around 19% of the population and continues to expand, with penetration in both Sweden and Norway exceeding 20%. Increase in overall membership in the EU. It was estimated at 4% in 2017 and has been on a positive trend for more than a decade.
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New budget banners led the first part of this growth wave, significantly lowering monthly access costs, increasing the number of centers and expanding the addressable base of consumers. Further innovations in premium formats and offerings have created a more segmented and competitive sector.
New platforms allow consumers to share (and access) a wider variety of personal vacation assets, including vacation homes, campervans/RVs, and local experiences. Vacation rental
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