Phocuswright Analysts Share Their Travel Predictions for 2025

Excerpt from PhocusWire

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.

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.

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