Demand for experiential travel has increased significantly. So too has demand for destination management companies (DMCs) across the globe; the segment is expected to grow and fast, with Allied Market Research predicting the value to increase from $3.6 billion (in 2022) to $6.9 billion in 2032.
Flywire-commissioned research on both luxury travelers and travel providers, including DMCs, provide insights in support of this positive growth prediction. They indicate luxury travelers are using DMCs more than ever, driven by their desire for personalized, authentic experiences, and that they plan to spend more on their vacations this year than before. Their thoughts on what makes travel “luxury” align strongly with the services DMCs offer to clients but there are notable generational shifts in behavior that are worth noting.
Younger travelers, particularly Gen Z and Millennials, are spearheading changes in customer behavior; more travelers in this age group are using DMCs than their older counterparts and are planning to increase their travel spending than in older generations. They are embracing the slow travel trend and prioritizing sustainability more than older generations.
As well as addressing these generational shifts, to achieve sustained growth DMCs will need to ensure their customer’s pre-departure experience matches their carefully crafted on-the-ground encounters. Payments are particularly problematic for DMCS, with a big impact on customer experience. Effectively leveraging technology to solve the problem of payments will deliver internal efficiencies that will enhance the customer experience and make high growth more achievable.
Read on for insights to inform the growth plan for your DMC.
1. Higher proportions of Gen X, Gen Z and Millennial luxury travelers use DMCs than luxury travelers aged 62+
Luxury travelers looking for bespoke immersive adventures are favoring destination management companies to provide them with outstanding travel experiences and cater to their dynamic preferences, particularly those from the Gen Z/Millennial age group and Gen X.
The 2024 Annual Luxury Travel Report published by Flywire showed strong growth in DMC use among luxury travelers within the last year as well as an emerging generational gap. Significantly higher proportions of the Gen X and Gen Z/Milliennial luxury travelers surveyed said they had used a DMC in the past year than luxury travelers aged 62+ (43% & 53% vs 8%). While there are likely to be fewer luxury travelers in the youngest group, their propensity to use a DMC is surely a positive indication of things to come.
The same research uncovered clear parallels between the perception of what constitutes luxury travel and DMC services. Almost half of all the luxury travelers surveyed said that, to them, luxury travel means having personalized experiences, someone taking care of all the arrangements, and having once-in-a-lifetime experiences. 3 in 10 also said it means having local experts planning the trip. with Gen Z and Millennial and Gen X travelers more likely to say this than the older generation, This, along with the finding that almost all Gen Z/Millennial travelers are planning to increase their spending on vacations this year make this customer segment potentially very lucrative.
2. Bucking conventional wisdom, slow travel appeals to younger luxury travelers, sustainability also a priority
According to Flywire’s Travel Provider Insights Report 2024, travel providers are continuing to see a growing emphasis on slow and sustainable travel. Younger luxury travelers are driving this demand, according to the Annual Luxury Travel Report 2024 by Flywire. These travelers are more likely to embrace slow travel—spending more time traveling; fully immersing themselves in local customs and/or culture—and prioritize sustainability in their travel plans too.
85% of Gen Z and Millennial luxury travelers (18- to 45–year-olds) surveyed plan to take two or more slow travel trips in the next year compared to just 29% of travelers over 62-year-olds. Similarly, almost all Gen Z/Millennial luxury travelers (95%) look for accommodations with sustainability-focused policies and/or products whereas only 1/4 of their older counterparts do the same.
For some travelers sustainability translates to wanting to support the local economy while immersing themselves in local culture, which is where DMCs, with their connections to local guides, attractions, artisans and businesses, are uniquely placed to meet this growing demand.
3. Asia Pacific region to see high growth
Following a meaningful delay in post-pandemic recovery, growth in Asia Pacific is likely to be supercharged by travelers seeking cultural encounters, thrilling adventure activities, and unique off-the-beaten-path experiences they were denied for so long; there has been a substantial increase in the number of luxury travelers saying their next destination would be within the APAC region, Flywire’s 2024 Annual Luxury Travel Report found.
- 25% - Australia (+79% YoY)
- 21% - Asia (+110% YoY)
- 17% - the South Pacific (+89% YoY)
This shows massive potential for growth in this region, and is supported by Allied Market Research which forecasts DMCs in this region will see a 8.2% CAGR for the next ten years-the fastest growth of any region globally.
4. Secure and simple payments critical to client experience, solving payments to deliver savings and drive growth
A good payment experience significantly impacts overall client satisfaction. The Flywire Travel Provider Insights 2024 report found that a vast majority of travel providers agree that easier payment processes lead to happier customers. However, many travelers (and providers) encounter issues with payments, particularly for international transactions.
According to the 2024 Annual Luxury Travel Report, 94% of luxury travelers want an easy way to pay for all parts of their trip at once but most experience multiple pain points when trying to do so. The foremost issue is concern over the security of their payment, but at least 1 in 5 luxury travelers also have difficulties with unexpected fees/exchange rate confusion and the inability to pay using their preferred credit card or in their local currency. This is likely related to the fact that most travel providers experience some difficulty processing international payments, according to Flywire’s Travel Providers Insights 2024 report which found only 1/3 of travel providers consider this very easy to do.
Payment issues can create internal inefficiencies which impact operations, causing delays to booking confirmation and a poor customer experience. DMCs are particularly affected because of the numerous suppliers—guides, attractions, accommodations, and transport providers—that require payment before an itinerary can be confirmed. Finding a better way to handle payments, including accepting payments in a customer’s own currency, would deliver operational efficiencies and a better customer experience. It will save DMCs time and money, ultimately delivering excellent conditions for growth.