Instead of buying physical goods, consumers are shifting to leisure and travel
The greatest investment opportunities can be found here.
As the coronavirus pandemic spread throughout the world in March 2020, the global leisure and travel industry abruptly collapsed. Nearly overnight, international travel fell by more than 99%; stocks fell and businesses scrambled to raise money. For the remainder of the year, the nightmare persisted. Activity in the US and UK leisure sectors ended the year down about 50% year over year, despite some easing of restrictions.
The pandemic, however, signaled the start of a worldwide tourist gold rush, even though the shutdown first seemed to be the end for the industry. The Boston Consulting Group (BCG) estimates that leisure travel was valued at £4 trillion worldwide in 2019. Despite the pandemic, that amount reached £5 trillion in 2024, a 25% increase in just five years. Furthermore, growth is not anticipated to slow. According to BCG, the global market will reach roughly £8 trillion by the end of the decade and £15 trillion by 2040.
Over the past five years, the leisure and travel market has expanded and undergone significant change. Travel expenditures were closely correlated with GDP prior to the pandemic, but since then, the market has decoupled as consumers place a higher value on "memorable experiences" than tangible goods. The so-called "experience economy" is now a multitrillion-dollar industry; according to Barclays research, the market is estimated to be worth between £5.2 trillion and £8 trillion, and by 2028 - 2035, it could reach £12 trillion or more. The global leisure and travel industry and the "experience economy" are not the same, but there is a lot of overlap. Travel, dining, and events are examples of unique, shareable "moments" that consumers value more than tangible goods. This shift in consumer spending helps to explain why leisure travel has become so popular.
Why are travel and leisure activities so popular?
These changes are being driven by two major tailwinds. The first is the millennial generation's preference for experiences over tangible goods. According to Barclays, about 75% of millennials prefer to spend money on experiences rather than goods, and their income is increasing more quickly than the overall economy.
For instance, during the three years between 2019 and 2022, the median wealth of people born in the 1990s more than quadrupled to £41,000, according to data gathered by the US Federal Reserve Board's Survey of Consumer Finances. Millennials' net worth grew by 12.74 percent in 2024, while the wealth of Generation X and Boomers increased by 6.5 percent and 2.7 percent, respectively. As of the second quarter of 2024, the total amount accumulated by millennials was £15.25 trillion. That represents a substantial increase from £3.93 trillion only five years ago. Born between 1997 and 2012, Generation Z's wealth is increasing even more quickly, with an average increase of almost 22% in 2024.
These numbers relate to the United States, where the two younger cohorts have benefited from rising wages, property values, and equity markets. However, comparable patterns have been noted globally, where the expansion of the middle classes as a whole is propelling growth in addition to the rise of the millennial consumer. Oxford Economics projects that over the next ten years, the number of middle-class households in emerging markets will double, from 354 million in 2024 to over 670 million by 2035.
According to the World Economic Forum, the number of households with an annual disposable income of £45,000 to £100,000 (at purchasing power parity) is increasing by 5.6 percent annually, and by 2030, 70 percent of new middle-class households will be in Asia, with China and India leading the trend. Over a billion more people will join the global consumer class by 2035, with four out of five coming from emerging markets.
K-shaped increase in expenditure.
The so-called K-shaped expansion of consumer spending is the second tailwind. Although the middle class may spend more overall on experiences, the wealthy actually spend the most on leisure and travel. More than half of all US consumer spending is currently accounted for by the top 10% and top 1% of American households, and collective leisure spending is expected to reach £544 billion in 2026, slightly more than 10% of the global market, according to recent research from Resonance Consultancy.
In 2026, the top 10 percent of households with annual incomes between £240,000 and £600,000 are predicted to take 4.3 leisure trips and spend an average of £7,900 per trip, up from £5,100 in 2022. In the meantime, it is anticipated that the top 1% (those with a net worth of £13 million or more and an income of £600,000 or more) will travel six times in 2026, spending an average of £12,400 per trip, up from £8,400. On the other hand, the consultancy calculates that the average American consumer spends £3,700 on 2.8 trips annually.
Furthermore, the trend is not solely being driven by wealthy Americans. The demand for upscale travel experiences is increasing due to the global jet-setting class, which is driving the industry globally. Furthermore, regardless of how dire the economic outlook may seem, consumers across all income levels appear hesitant to reduce their travel and leisure expenditures.
According to a recent survey conducted by the travel-trade association, ABTA, consumers would prioritize cutting back on travel over other expenses due to rising living expenses. Just 32% of respondents said they would cut back on holiday spending, which is less than what they would cut out on electronics, clothing, eating out, or recreational activities like going to the movies. The same is true for US consumers; according to a recent YouGov survey, 71% of consumers prioritize travel spending even when they cut back on other discretionary areas like eating out or shopping.
How can the leisure boom benefit investors?
Investors can profit from the trend in a number of ways. The first is to invest in the airline industry, which is not for the timid. Due to their extremely narrow profit margins, airlines face intense competition. Fuel price increases or fare wars can quickly wipe out margins, leaving carriers with debt from fleet acquisitions or in dire need of revenue to pay for aircraft leases. State-backed competitors, who can afford to operate routes at a loss, are another threat to independent carriers. Even though some airlines, like easyJet, Jet2, and British Airways (owned by FTSE 100 group IAG), have been able to diversify their revenue streams by entering the package holiday market, this is insufficient to eliminate the risks mentioned above. Tui also fits into this market, in my opinion.
The international cruise industry faces similar challenges in many ways. Companies like Norwegian Cruise Line Holdings (NYSE: NCLH), Royal Caribbean Group (NYSE: RCL), and Carnival Corporation (NYSE: CCL) compete fiercely in the market, and capacity problems persist. Fuel expenses are another big hassle. Despite a record number of reservations, Carnival recently stated that its fuel costs could increase by 40% in the current quarter, forcing it to lower its forecast. Similar to airlines, cruise lines frequently have high debt levels in order to construct the enormous ships needed for their operations.
Lindblad Expeditions Holdings (Nasdaq: LIND) is the lone exception to this rule. This business is most well-known for its long-standing strategic alliance with National Geographic, which grants it access to some of the most upscale travel experiences available worldwide. It has a fleet of twenty-three owned and chartered ships, including cutting-edge polar ships like the National Geographic Endurance and National Geographic Resolution, which are among the few in the world with the authority to travel to places like the Galapagos Islands and the North and South Poles. Additionally, it signed a strategic partnership agreement with Disney, and in the most recent quarter, sales through this channel increased by 35%.
The numbers demonstrate that Lindblad has successfully entered the high-end experience market with its distinctive offering. The company reported net yields of £1,279 per guest per night in the fourth quarter of last year, an increase of 11%. That contrasts with a yield of about £190 per night for Carnival cruise passengers (these are not exact like-for-like comparisons because the companies report these figures using different metrics).
Invest in the hotel sector to park your profits.
The hotel industry is one of the most appealing sectors. Companies like Marriott International (NYSE: MAR), Hilton Worldwide Holdings (NYSE: HLT), Hyatt Hotels Corporation (NYSE: H), and InterContinental Hotels Group (LSE: IHG) dominate this market. All of these businesses have created a fee-driven, asset-light business model in which they contract out hotel purchases to operators who run the establishments under a franchise-like arrangement. This model has produced excellent financial results. Marriott's total return over the last 15 years has compounded at a rate of 15.7 percent annually. Marriott reported slightly over £26 billion in revenue in 2025, with an operating margin of 15.8% and a return on capital invested of almost 25%, which is a measure of profit for every dollar invested in the company.
The majority of the company's operating cash flow was given back to shareholders since it needed little capital to open new hotels. It made £3.2 billion in operating cash flow and put £1 billion back into the company. After that, it used debt to close the gap between cash flow and shareholder returns, returning £4 billion to investors through dividends and share buybacks. That has been the strategy for the majority of the previous five years. The company has a record pipeline of roughly 4,100 properties and almost 610,000 rooms, and it reported gross room additions of 100,000 units globally in 2025. Targeting the market's high-spending cohorts and the experience economy, the company is leaning toward all-inclusive and ultra-luxury segments.
At Hyatt Hotels, the same holds true. The hotel group saw a 4% increase in system-wide revenue per available room, or RevPAR, a crucial hotel metric, at the end of 2025. More significantly, because of high demand, all-inclusive resorts' RevPAR for packages was 8.3%. With the £140 million purchase of three Alua resorts last year, the company is also following the trends of luxury and all-inclusive travel. In 2025, it also acquired Playa Hotels and Resorts, expanding its portfolio of all-inclusive resorts to include 15 locations in Mexico, the Dominican Republic, and Jamaica. A few months later, it sold the portfolio for £2 billion to Tortuga Resorts, a real estate and asset management platform. As part of its asset-light structure, it retained a 50-year management agreement for 13 of the 15 resorts in the portfolio, along with additional incentives.
One of the few companies listed in London, IHG, is capitalizing on the expansion of the middle class in developing nations. The group opened a record 443 hotels in 2025 and added 694 more to its pipeline, including the highest number of hotel openings and signings in Greater China. Approximately one-third of its current estate consists of 6,900 open hotels and an additional 2,300 in the works. It's naturally leaning toward luxury as well. Its "curated for distinct points of view and cultural relevance" Noted Collection was introduced last year. This will coexist with other high-end IHG brands that were introduced last year, like Vignette, Voco, Garner, and Ruby.
The 5,800-hotel chain Accor (Paris: AC) has long promoted luxurious experiences for visitors, and this is now paying off handsomely. While RevPAR's mid-market brands saw only 2.4 percent growth in constant currency terms in 2025, its luxury and lifestyle divisionwhich is about half as largereported growth of 9.8 percent. While its "Lifestyle Collective" hotels saw record growth, resort hotels continued to be a major driver of growth, especially in Turkey, Egypt, and the United Arab Emirates. Earnings before interest, taxes, depreciation, and amortization (Ebitda) for its brands showed consistent growth of 20%.
Purchase resort real estate.
The resort market is another fascinating market segment, and I've saved the best for last. Compagnie des Alpes (Paris: CDA) and Vail Resorts (NYSE: MTN) are the top skiing companies in the US and Europe, respectively. The biggest operator of ski resorts worldwide is Vail. It operates on multi-decade leases with some of the world's best skiing real estate and owns iconic locations like Vail, Beaver Creek, Whistler Blackcomb, and Park City. These companies' distinctive selling propositionmountain leasesis what makes them appealing. More significantly, they are the owners of the rights to eateries, lodging facilities, and retail establishments near the slopes. With its Epic Pass, which offers a steady income in an industry that can be cyclical, Vail has been able to capitalize on its position in the market among a core group of customers. Since its launch in 2008, its revenue from this pass has increased to over £1 billion at a 15 percent compound annual growth rate.
Like the majority of resort passes, the Epic Pass is modeled after Disney's. In the 1950s, the Walt Disney Company (NYSE: DIS), the company that invented theme parks as we know them today, introduced the first park pass using physical coupon books. These later evolved into unlimited "passports," the FastPass system, which was introduced in 1999 to cut down on wait times, digital FastPass+ in 2014, and eventually the paid "Lightning Lane" systems. Disney invented theme parks, but these days, the company's theme park division is tucked away alongside a number of other unappealing assets, like the challenging streaming division. £60 billion in capital expenditures to increase its cruise and park offerings may have a long-term negative impact on earnings.
Investors would be better off looking at Oriental Land Co. in Japan. (4661 Tokyo). One of the most successful theme parks in the world, Tokyo Disney Resort, is run by this company. Additionally, until 2076, it has the sole license to use Disney intellectual property in Japan. In order to take advantage of the experience economy, theme park and hotel sales recently reached all-time highs. In the upcoming years, it intends to add more rides and flexible tickets.
One of the biggest theme park operators in the United States, Six Flags Entertainment (NYSE: FUN), is having trouble growing again because of operational problems. Attendance fell by 13% after its merger with Cedar Fair, an effort to become more upscale, and an increase in ticket prices. Due to a mountain of debt resulting from the merger, Six Flags has turned to cost-cutting measures, further alienating its patrons. It serves as an example of what can go wrong in this market.
Additional avenues for leisure sector investment.
In addition, Banyan Tree (Singapore: B58), one of the top independent, multi-brand hospitality groups in the world focused on wellbeing and stewardship, might be worth a look.
With 100 upscale hotels, resorts, spas, galleries, golf courses, and homes in its portfolio, its revenue increased by more than 25% last year, while its core operating profit increased by 59%.
The casino and upscale resort industries are dominated by MGM Resorts International (NYSE: MGM), Las Vegas Sands (NYSE: LVS), Wynn Resorts (Nasdaq: WYNN), and Galaxy Entertainment (Hong Kong: 0027). As the "world's only global luxury integrated resort developer and operator," Wynn is the industry leader in the luxury sector. Wynn's RevPAR in its primary Las Vegas market has increased by 118% since 2019 and is about two-thirds of the industry average. The fact that its offering is the priciest on the strip doesn't bother the management. Instead of offering discounts during weak market times, the company has stated that it will continue to maintain premium brand positioning and rates. Additionally, it has been able to bind consumers with the Wynn Rewards loyalty program, which deters consumers from switching brands. Customers who stay and spend are rewarded by the system, which promotes repeat business.
However, the group's largest market is no longer Las Vegas. The group's earnings before interest, taxes, depreciation, amortization, and restructuring have increased by about 15% since that crown was recently transferred to Macau, China (Ebitdar). Additionally, Wynn is building the first integrated resort in the UAE, Wynn Al Margan Island, which could add up to £460 million in the "high case" or £345 million in the "base case" scenario (compared to £1.1 billion for Macau). Wynn has retired 12% of its shares through share buybacks over the last three years, but it is still very cash-generating despite its current heavy capital project spending. Al Margan's completion is quickly approaching, which means that cash flow and returns could increase in the upcoming years.
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