Tourism is a major pillar of global economic growth. But awareness of tourism’s huge environmental and social costs is growing. As it does, our analysts see scope for sectors across the tourism industry to use sustainability as a point of differentiation.
Global tourism is an $8.8 trillion industry, and the World Travel and Tourism Council projects this to grow to $13 trillion by 2029. Accounting for a tenth of all jobs worldwide, it is particularly important to developing countries in alleviating poverty, providing employment and driving infrastructure investment. By 2030, emerging economies are expected to dominate as tourist destinations, representing 57% of international tourist arrivals vs 46% in 2018.
Source: Barclays Research, World Travel and Tourism Council, UN World Tourism Organization (UNWTO)
Tourism is a direct contributor to global greenhouse gas emissions, natural resource depletion, environmental pollution and waste. It also has major social impacts such as congestion, overcrowding and increased costs of living for local residents. While tourism’s contribution to GDP is expected to grow by a robust 3.7% CAGR over the coming decade, this economic growth could come at high environmental and social costs.
5-8% of global greenhouse gas emissions are caused by tourism
Source: UN World Tourism Organization (UNWTO), UN Environment Programme (UNEP)
Policymakers are exploring actions that could mitigate the negative impacts of tourism. These include the launch of CORSIA in 2021, the first global, industry-wide carbon-offsetting scheme for international flights, incentives for the production and use of sustainable aviation fuel, and local measures to manage levels of tourism.
But just as powerful, consumer interest in more sustainable ways to travel and experience the world has risen sharply due in part to news stories around overtourism, flight-shaming and the ‘Greta effect’.
In the Barclays Sustainable Tourism Survey, we found that most consumers have some awareness of the environmental or social impacts of their vacations. A substantial minority are also taking action to reduce the negative effects of travelling, whether through staycations, different modes of transport, or using more sustainable accommodation providers. Travellers aged 18-24 are particularly interested in using alternatives to flying to get to their destination (49%) and reducing the number of flights they take per year (24%).
Source: Barclays Sustainable Tourism Survey
The case for sustainable tourism, that takes full account of its current and future economic, social and environmental consequences, is growing rapidly. Our analysts see sustainable tourism breaking down into two parts: eco-travel – the mode of transport to get to the destination; and eco-tourism – the sustainability of the accommodation and other experiences at the destination.
In both components, there are sectors that face direct and indirect risks and opportunities from this growing trend.
Source: Barclays Research
Actions by policymakers, industry and consumers to make tourism more sustainable have significant implications for many business sectors. Risks to existing business models are widely evident – especially for the airline industry, which is most vulnerable to policy change. However, we also see exciting potential for certain industries to capitalise on growing consumer awareness of, and demand for, sustainability to deliver clear points of differentiation.
Source: Barclays Research
In a world increasingly focused on climate change – and with multiple international climate target dates moving closer – tourism faces both opportunities and risks arising from the growing demand from policymakers and consumers for greater sustainability.
There are questions that both management and investors can ask to assess a company’s sustainability credentials and vulnerabilities. For example*:
Does the company have robust targets relating to the environmental and social impacts of its operations?
Can the company see any cost/revenue opportunities from improving its sustainable tourism credentials?
What specific products/services are consumers demanding? How is the company – and its competitors – responding?
*Authorised Barclays Research clients can access a comprehensive list of considerations to assess the corporate opportunities and risks arising from sustainable tourism here.
Some of these questions may demand major changes to company business models and practices. But for those corporates that move ahead of future policy change and use better environmental and/or social practices as a point of differentiation, we believe the route to sustainable tourism will be a worthwhile journey.
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