In early July the Organisation for Economic Co-operation and Development (OECD) released their 2024 Tourism Trends and Policy report, highlighting a sustained recovery in global tourism, but also the need to manage rising tourist flows sustainably. The pandemic abruptly unwound six decades of consistent growth, but the industry has bounced back and a full global recovery is expected by the end of 2024.

International tourist arrivals into the Middle East are now more than 30% above pre-pandemic levels according to UNWTO data. Europe, benefitting from strong intra-regional travel and dollar-rich US tourists, has also seen international arrivals exceed pre-pandemic numbers. France and Spain maintain their positions as the most visited countries in the world, while Portugal welcomed a record 19.4 million international tourists in 2023, 12.1% more than in 2019.

The rebound in the Asia Pacific region has been more gradual due to the delayed easing of travel restrictions, historical dependence on tourists from more distant markets, and a slower resurgence of the vital outbound market from China. But here too recovery is coming quickly and prospects are positive.

Japan is one standout; a weak yen is stimulating a dramatic recovery in visitor numbers and spending, and inbound tourists reached record levels last year. This has driven significant interest in the country’s hospitality sector, and it saw the most hotel investment activity in the region in the first half of 2024, and globally, second only to the United States. High-end tourists are relatively underserved in Japan so further growth in upmarket hotels, ryokan (traditional Japanese inns), integrated resorts and ski resorts are expected.

Japan’s success echoes positivity in the sector more broadly. At a time when investment into all other asset classes continued to fall (-20% year on year (YoY)), global hotel investment transaction volumes were stable in the first half of 2024 (+2% YoY), according to RCA data. Hotel investment into both Asia and Europe, in particular, rose, with the latter seeing remarkably strong growth in average daily rates (ADRs), 25.9% higher than in 2019, but now starting to normalise.

Recent recovery brings some of the sector’s challenges back into the spotlight. Tourism makes an important contribution to economic growth. In 2022, its direct GDP contribution in OECD nations rebounded to 3.9%, just 0.5% shy of its 2019 level. However, the strength of the recovery is causing challenges in places struggling to manage demand and its effects on local communities and the environment. At the same time, workforce shortages mean that many businesses in the sector have difficulty attracting and retaining workers.

We considered some of these challenges in last year’s Impacts article on new directions in hospitality. Tourism as a whole is responsible for around 8% of the world’s greenhouse gas emissions, with transport at the forefront. Milder winters are cutting ski seasons short (though some are more resilient than others), and heatwaves could make peak holiday periods less appealing.

The solution, the OECD report says, lies in promoting greener business models and destinations, encouraging consumers to make more sustainable travel choices, and planning to disperse visitors and better spread benefits. Training and education will be key to developing and retaining tourism workforces, while digital transformation will boost productivity.

Real estate plays a role here too. A trend to restrict short term rentals in residential homes in some markets highlights the importance of, and indeed may boost, professional Extended Stay products such as apart-hotels. Consolidation of hotel brands and growth of operators can improve the ability to provide better wages and adapt to seasonal changes in demand and workforce, helping to reduce labour shortages.

The recovery in global tourism underpins a buoyant hospitality real estate sector. With continued growth, albeit at a more moderate rate after the post-pandemic bounce, the challenge will be managing future expansion sustainably. With rising demand for greener, more inclusive tourism the industry is already starting to embrace a more sustainable approach.

Further information

Contact Paul Tostevin

New directions in hospitality: eco-tourism and staycations lead the way