As we enter a new year, Phocuswright analysts are looking to the future, and more specifically, what might happen in the next 12 months.
Together, the group has their eyes trained on advancements in electric vehicles, luxury travel, growth in the Asia Pacific region, administration changes in the United States and, of course, artificial intelligence, among other topics.
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Responses have been edited for clarity and length.
Coney Dongre, research manager
- In 2025, luxury travel will see significant growth, supported by a post-pandemic resurgence and rising affluence, with a shift towards bespoke and meaningful experiences. To combat overtourism, destinations will focus on attracting high-spending travelers rather than mass tourism. Airlines worldwide will expand their premium offerings, while hotel chains will introduce more luxury properties and niche experiences like adventure, wellness and gastronomy tours will become more popular.
- The hotel sector in Asia Pacific is set to become more organized as the region’s fast-growing economies and travel markets attract global hotel brands looking to expand their presence. Even in the budget segment, local players are making efforts to standardize offerings and improve service quality by consolidating supply. This trend will particularly accelerate in markets with strong domestic tourism demand, such as India, China and South Korea.
Cathy Walsh, senior research analyst
- American sentiment on the outcome of the 2024 presidential election ranges from positive to negative to indifferent. But one thing is clear: the incoming Trump administration has promised major policy changes. With control of both houses of congress and a conservative majority on the Supreme Court, it is likely that at least some of President-elect Trump’s agenda will come to fruition. These prospective changes include big shifts in economic and tax policy, regulatory stance, immigration and visa requirements, climate and environmental initiatives and foreign relations. As these changes unfold, the travel industry should be poised to respond to opportunities and/or challenges that may emerge.
- Expect to see accelerated developments in agentic AI. As foundational models and multimodal capabilities continue to improve, there will be expanding opportunities for travel companies to leverage the power of autonomous agents.
Mike Coletta, senior manager, research and innovation
- In 2024, 39% of active travelers used generative AI in some capacity, up from 22% in 2023. At this pace, usage will likely crack 50% in 2025.
- Online travel demand will splinter further, especially in Google as AI Overviews affect more search traffic and as Google’s Gemini, OpenAI’s ChatGPT and other LLM leaders unveil deeper travel integrations in their chat environments and begin rolling out highly capable autonomous agents.
- The travel industry will begin to seriously process the implications of the coming convergence of autonomous agents and digital identity, from the impact on distribution, marketing and payments to the implications for personalization, loyalty and backend operations.
- Travel startup funding will rebound from the lows of 2023 and 2024 (around $5 billion, down from an average of almost $10 billion from 2014-2022), with the bounce driven by lower interest rates, a completed resetting of company valuations, the deployment of new VC funds and the maturation of AI-powered products.
Robert Cole, senior research analyst, lodging and leisure travel
- For hospitality, 2025 will be all about generative AI, but the challenge will be how the industry harnesses its potential and deploys it to address its most significant challenges. The use cases of AI-assisted code development and AI-based customer service will make further dramatic advancements as models improve, but those hoping to solve the itinerary creation & booking challenge will still encounter headwinds. The personalization and product-fit aspects of travel purchases require authoritative sources of truth to manage persona and complex itinerary dynamics with real-time access to inventory and satisfy best price eligibility - especially across multiple suppliers and disparate closed groups. The real foundational work required will be cleaning up industry data and system interoperability.
- The hospitality industry will realize digital identity, privacy and security for both consumers and properties will need to be addressed to satisfy traveler and regulatory expectations. The European Union Digital Identity Wallet initiative, launching in 2026, includes a travel use case enabling citizens of its 27 member states to use their digital identity wallet when booking or checking into EU hotels. Hotel owners, managers, brands and technology vendors will have considerable work to prepare for travelers expecting a seamless hotel booking/stay/payment experience comparable with an Uber ride.
Bing Liu, director, surveys and analytics
- Demand for domestic travel is expected to grow in 2025, driven by rising economic concerns such as inflation and increasing international travel costs. Travelers are prioritizing destinations within their own countries, focusing on affordable and accessible options while exploring nearby or less-frequented locations. Shorter trips, including weekend getaways and staycations, are becoming increasingly popular as people seek unique experiences that avoid the higher costs associated with international travel.
Gary Bowerman, research analyst, Asia Pacific
- Trains, planes and inclusion. In Southeast Asia, high-speed rail (HSR) development will be a major focus in 2025. Vietnam’s decision to approve an ambitious north-south HSR is likely to be followed by Indonesia green-lighting a major extension of Southeast Asia’s first bullet-train service – which connects the capital Jakarta and third city Bandung – to the dynamic second city of Surabaya. These are long-term transport infrastructure projects, but expect more regional governments to unveil their own HSR plans over the coming months.
- Chinese aircraft manufacturer COMAC opened regional offices in Singapore and Hong Kong in October as it steps up efforts to sell its C919 narrow-body jet to airlines in Asia Pacific. Obtaining the required certifications in the US and EU will be difficult, meaning COMAC’s goal of competing globally with Airbus and Boeing is unlikely any time soon. Nevertheless, it is possible we could see the C919 flying through Asian skies beyond Chinese airspace in 2025.
- And keep your eye on Thailand, which recently became the third jurisdiction in Asia – after Nepal and Taiwan – to legalize same-sex marriage. This is a significant progressive step for a Southeast Asian country, and will be selectively integrated into some of Thailand’s tourism promotions in 2025.
Lorraine Sileo, senior analyst and founder of Phocuswright Research
- It’s almost impossible to predict what will happen in 2025 as AI develops. Will AI agents swing momentum away from intermediaries and toward supplier direct channels? Will AI-powered search (Bing/Copilot, Perplexity, ChatGPT, et al) take significant share away from Google? Will start-ups flourish or the big just get bigger? These are questions that are hard to answer right now, but judging from the way things move in the travel industry, we can make some assumptions.
- Anyone looking at AI as the great equalizer might be disappointed. There are entrepreneurs with great ideas and many will get funded to bring their visions closer to reality, but ultimately the travel mainstays – Booking.com, Expedia, Google – will continue to benefit from advances in machine learning, exploit decades of data and maintain their leadership from the top to bottom of the funnel. Uber, Airbnb, the GDSs and mega-TMCs will do whatever it takes to persevere, whether it’s to partner, merge or acquire. However, there’s also good news for new players and challengers. Funding should finally loosen up for start-ups as 2025 will be a year of great innovation. Secondary destinations, boutique hotels and unique experiences will flourish as they are able to reach consumers in new, more targeted ways. Information will flow like a river and, even if “personalization as promised” (e.g., based on personas, context, past behavior) doesn’t yet happen as it should, every search will be more personalized as consumers learn to maneuver around generative AI. This empowerment along with continued strong travel demand should make 2025 one for the record books.
Norm Rose, senior technology and corporate market analyst
- A flood of AI autonomous agents enter the market from multiple AI companies using travel as a proof of concept beginning the transformation from search to fetch as the new Internet paradigm.
- Blockchain emerges as a solution for cross border payments and lower cost settlement. A major airline works with a major travel blockchain to bring blockchain payment and settlement to multiple travel segments
Peter O’Connor, senior market analyst, Europe
- In a sector where size means everything, OTAs will continue to consolidate. With Booking.com leading the field in most markets, competitors will be forced into closer commercial relationships (or even mergers/takeovers) to gain the scale necessary to survive. Expect the emergence of the first pan-global alliance in the online travel space, where companies from Asia, Europe, the Middle East, South America and the U.S. will combine forces to develop a more compelling supplier proposition, offering a one-stop, high-volume, distribution proposition for companies wanting to sell into multiple markets. Niche players will continue to thrive but will increasingly specialize to ensure their survival and even when considered collectively will remain a minor generator of demand for most suppliers. Third-party distribution will essentially become a two-horse race (Booking.com vs others) and thus likely attract increased regulatory scrutiny.
Fabián González, market analyst, Spain
- Upscale tourism, which experienced accelerated growth in the aftermath of the pandemic, is poised to maintain a strong development trajectory in the coming years, fueled by two clear trends:
- The first is a shift in preferences among younger travelers, who are increasingly prioritizing experiences over tangible goods. The YOLO ("You Only Live Once") mindset is gaining traction, particularly among wealthier individuals.
- Secondly, and closely related to the first, there is a growing emphasis on holistic well-being. While nutrition and fitness have already become integral components of a healthy lifestyle, the next frontier is sleep and restorative rest. The widespread adoption of smartwatches that monitor the poor quality of daily sleep has brought this issue to the forefront. Once the domain of specialized wellness centers, sleep quality initiatives are now expanding into broader hotel segments. These establishments have recognized the demand and are rolling out programs, products and services aimed at enhancing the sleep experience for guests—at least during their stay.
Madeline List, manager, research and special projects
- Competition in the short term rental market is going to persist and operators will have to improve properties and amenities, expand into alternative or ancillary revenue streams, or risk being pushed out of the market.
- While demand is strong, it is more scattered than it used to be – Airbnb saw excellent growth in markets outside of North America and our consumer research shows that STR users are more likely to leave the U.S. for leisure trips. So while they’re still spending, they’re hardly doing it all in one place. And with so many properties around, operators are all competing for smaller pieces of the pie. Of course, there is still a great deal of success to be had, but not everyone has caught up to the proper standards just yet. Details from design and setup (the properties dressed head to toe in HomeGoods wares just don’t cut it anymore) and the service levels need to be elevated, or guests will find other accommodation options that work better for them. The principles of how to put an excellent property together are not new. But with interest rate cuts moving so slowly, hosts who don’t step up their game may not find themselves with an easy exit strategy.
Stan Pawlow, data analyst
- We are seeing the rise of electric vertical takeoff and landing (eVTOL) companies in the Phocuswright's Travel Startups Interactive Database. I think this is signaling a transformative shift in urban transportation. Companies and cities that leverage the eVTOL aircraft and the necessary hubs to support them will be key players in reshaping the future of transportation. This innovation has the potential to drastically reduce urban congestion and offer a sustainable alternative to traditional commuting. As regulatory frameworks evolve and infrastructure investments grow, eVTOL technology could become a cornerstone of smarter, cleaner, and more efficient urban mobility systems.
Travel Forward: Data, Insights and Trends for 2025
Phocuswright's Travel Forward: Data, Insights and Trends for 2025 provides broadscale insights into the $1.61 trillion global travel market, offering essential data for understanding industry trends and growth.