Youth travel is emerging as one of the industry's most resilient sectors, delivering significant volumes of business across the travel ecosystem while maintaining a compelling growth profile.
NB: This is a viewpoint by Mike Cleary, global managing director for StudentUniverse.
The UNWTO's Power of Youth Travel report predicted that by 2020 there will be some 370 million youth travelers. At StudentUniverse, our focus on the student and youth travel market centers around 18-26-year-old travelers. By 2020 this segment will be worth $320 billion.
As they embark on once-in-a-lifetime experiences these travelers are in many ways unlike other groups. We’ve identified the top trends that are critical to understanding how this segment travels.
Dynamics of student travel
The student market has its own dynamics which differentiates it from the wider travel sector. For example, students are generally more resilient in the face of terror attacks, political uncertainty and health scares (such as Zika).
Even last year in the height of Zika concerns, two of the areas most directly impacted by Zika - Cancun and San Juan - had an increased volume of travelers year-on-year for spring break travel. In 2017, both were in our top six spring break destinations booked as well.
Generally, students are less likely to change or cancel their travel plans as a result of happenings around the world than their parents might be. Students know that once they start a full-time job, their ability to pack up and live abroad for a semester, take a gap year, or even a two week vacation could be all but over for a while—they want to take advantage of the ability to travel while they have the time to do so.
Additionally, students are "traveling for purpose" and have a specific reason to be at a specific location for a defined duration. This could be term times dictating the inbound and outbound departure dates for long-haul international students, half-term equivalents offering a prescribed short leisure break opportunity, or the desire to get away for a long weekend.
In this way, student travelers often have more in common with business travelers than with leisure travelers.
The golden age of student travel
The factors pushing student and youth travel into the mainstream range from the ubiquity of technology to the improving macro-economic climate via globalisation and demographics.
Examples of this include:
● Europe being more within reach than ever, given plummeting student prices from the US to Europe - down 40% since 2014 for spring travel and 44% since 2014 for summer trips. In the past year alone, pricing on travel from the US to Europe is down nearly 30%.
● The academic world evolving to offer students more “built-in” study abroad experiences.
● Online distribution allowing students to plan their trips in advance while, at the same time, students are increasingly using skilled agents to plan complex itineraries and custom-designed gap year experiences.
● Mobile making on-the-go and spontaneous in-trip decisions and purchases possible, from day of stay hotel booking apps such as HotelTonight or instant ride-hailing via Uber, Grab or Didi.
One of the most well-known annual student travel periods is the spring break, a part of the US academic calendar since the 1930s. Our bookings for spring break have grown by double digits year-over-year for the past few years. One reason for the jump is much lower US domestic fares, Europe fares and intra-Europe fares. Our spring break bookings this year confirm the trend - roundtrip flights from the US to Europe are, on average, 20% lower than for the same period last year.
Domestic airfares in the US have been falling in real terms since end of 2014. In Europe and Asia Pacific, the price wars between the low-cost carriers are giving youth and student travelers choice and competitive prices.
Airlines around the globe are adapting their pricing models in light of the competitive environment. The introduction of basic economy fares by United and American – fares that don’t allow for seat selection, change/cancellation, and in some cases even the use of overhead bin space – allow the legacy carriers to offer fewer services in an effort to compete with the lower fares introduced by low-cost carriers.
Given that price is the primary concern for more than 90% of students when booking travel, airlines need to be creative and offer other points of differentiation to capture this segment.
While fares are cheaper and economy fares are popular, students are also interested in saving money by opting for less convenient routes. 65% of students would take a flight with one or more stops to save money compared with the direct or non-stop option, while 60% of students polled would fly to a less convenient airport to save money.
This option is welcomed by students, even if the savings are relatively modest. Three out of five students we polled were interested in swapping convenience for cash, more than 70% of whom would do so for savings of between $50-$100.
The cheapest option, regardless of how it is branded, is chosen by around two in three of our customers, but students won’t just book the cheapest flight full stop. Many students consider travel time, the airline, where the stop is, the baggage inclusions with different ticket options and so on. These students are prepared to sacrifice price, but expect transparency in the information around these details when they are shopping for their flight.
Short and sweet, the more the merrier
One consequence of the affordability of air fares is the emergence of micro study abroad experiences. Trips overseas of four weeks or even less are now a viable option, either for students looking to travel independently or for small groups accompanied by a professor.
International students taking additional study experiences from their temporary home also contributes to this trend.
More students are visiting Europe for trips between 14 and 27 days. Between 2015 and 2016, trips of this duration were up 37% year-over-year in the fall and 98% year-over-year in the spring.
At the same time, groups traveling with 10 or more people (often faculty-led) saw a 9% growth year over year. The sizes of groups traveling are also up 6% year over year.
Group bookings are often difficult to organize using the traditional online booking channels and the dynamics of group payments are often a pain point. Specialists in student or group travel with agents dedicated to group travel experiences are ideally poised to exploit one of the few areas where the technology prowess of many larger travel providers comes up short.
The role of mobile
Youth travelers, particularly the core group of students aged between 18-26, have grown up in a world of OTAs, social media and constant connectivity. While students traveling abroad a decade ago might have bought an international phone for texting and been relatively out of touch during their international travels, many students today opt for unlimited international coverage from their primary cell phone provider so they don’t miss a beat.
T-Mobile has become very popular amongst students who can use unlimited texting and data in more than 140 countries at no extra cost.
Students today are able and willing to share their experiences on social media in near real-time.
But when it comes to booking, desktop is still the dominant channel. We see 65% of students searching on mobile, but only 20% ultimately book on mobile (14% book in the app and 6% book on mobile web). International students are leading the charge with mobile—they are 2.5 times more likely to book on mobile or in-app as compared with US students.
App and mobile web bookings have grown 126% year-over-year between 2016 and 2015, indicating that students are generally becoming more comfortable making significant purchases via mobile apps. We added hotels into our app in October 2016 and in 2017 to date, 32% of our hotel business is booked on mobile, covering app, web and tablet.
We believe that hotel bookings on mobile could be a function of the bookings occurring more last minute and in-destination, as compared with flight bookings that are generally done further in advance.
An ecosystem of opportunities
Specialists in youth and student travel can offer a range of relevant products which cover the entire sector – from airfare to visa support services and everything in between. It’s important to students to be able to book everything in one place, from flights to accommodations to tours and insurance.
To the extent that everything can be done through a single site/OTA, students prefer the ease of a single login and point of contact for their trips. Travel providers looking to engage the student market should keep in mind the importance of creating a complete travel experience from a single platform.
Global OTAs such as booking.com and the Expedia Inc brands are also selling to students and youth travelers, as are the big regional players - Ctrip in China, MakeMyTrip in India, Despegar in Latin America.
But students opting for these sites will not have access to specialty pricing with these providers that comes from negotiating on behalf of students with the airlines and selling in a protected channel which students have to verify their status in order to purchase.
Meanwhile, there are niche operators which focus on specific areas such as volunteering, teaching abroad, working abroad, or festivals, to name but a few. Companies such as Selfscore, which helps international students open credit cards and build credit in the US without previous credit history, are driving the industry forward and removing many of the barriers to international study.
The scale of the business opportunity in student and youth travel is measured not in billions of dollars but in hundreds of billions, which explains why there is so much interest in trying to appeal to this market.
In the 2015-2016 school year alone, the number of international students at American colleges and universities grew by 7.1 percent according to Open Doors, topping one million students, all of whom have a frequent need for international travel arrangements.
This indicates the fast-paced growth of only one segment of the student and youth travel market. Brands which take the time to understand the subtle and not-so-subtle differences between this segment and the wider market will be the ones who succeed.
NB: This is a viewpoint by Mike Cleary, global managing director for StudentUniverse. It appears here as part of Tnooz's sponsored content initiative.
Algorithms or agents? There’s room for both in travel (Jan17)