Overtourism and Third Tier Market Growth
Major cities are predictably equipped to manage large scale volume, occupancy and growth. Whereas, smaller communities are often challenged with rapid growth resulting in an abrupt strain on the local city and infrastructure. The term overtourism was coined in 2012, however it didn’t become widely used until 2017. In recent years, it has become an immense global economic and environmental and tourism topic. Overtourism not only pertains to the number of visitors but the ability and capacity of which to manage them.
Popular destinations such as Amsterdam, Venice, Greece, Machu Picchu and Santorini have been seeing striking rates of tourism congestion for a while. In a recent article the Washington Post highlights alternatives to some of these popular destinations positioned as Detouring: Overbooked and Overlooked. This mentions substitute destinations that are equally rich in culture and natural beauty yet, have far less overcrowding and offer desirable experiences.
In the U.S. major cities in California, New York, Florida, and Nevada continue to be popular tourist attractions. However, since 2008 the U.S. has also experienced select but substantial increases in National Park visitors and recreational tourism. The National Park Service reported having 330 million visitors in 2016 and 2017, even more than the record-breaking 300 million visitors in 2015. Combined the National Park system reports having had 1.5 billion visitors over the last five years. The graph below depicts National Park Visitor growth from 2008 through 2017.
With rising interests circulating around nature, National Park excursions and recreational activities this presents notable changes and challenges for many third and fourth tier U.S. cities. In addition to the demands set forth with increasing park visitation, the National Parks must also accomplish increasing maintenance needs as they continue to protect conservation initiatives and municipal visitor damages.
Seasonality and Growth
First and second tier cities are expected to have strong travel attributes. These markets typically offer a robust selection of luxury, upper-upscale, and lower priced hotel options. Whereas, many third and fourth tier markets have gaps across their hotel supply. These markets typically include a few upper-upscale properties mixed with an abundance of lower profile hotels. This is a common supply scenario for places where tourism has been historically low or primarily seasonal. As seasonal cycles change with increasing tourism, supply and demand ratios are undergoing changes as well.
Whereas tourism in the past has centered around first and second tier cities, new demand generators have accelerated the lure of remote third and fourth tier vacation experiences. More people are choosing to avoid overcrowded and saturated destinations in search of new experiences off-the-beaten path. This introduces a variety of new lodging dynamics for smaller less traveled areas. This also greatly impacts local life cycles, seasonality, residential housing and cost of living ratios for year-round residents.
A number of smaller markets are starting to see stronger shoulder season growth. Many of these locations also have swells of congestion outside of their anticipated high-season sequences. This results in more traffic and longer waiting lines, blurring the margins between high-and-low season. This in turn can also present unexpected staffing challenges to maintain quality services, as well as the hiring and retention of experienced employees and skilled workers.
In combination with motivations seeking new adventures, Airbnb, Instagram and social media have put a recognized emphasis on culturally diverse and unique travel. These have created a new division of the market highlighting uncommon vacation traits and revealed hidden-gem travel interests. The Airbnb platform has also presented a vast selection of new accommodation options and destination choices. Although Airbnb and VRBO options are increasing, they do not solely drive this emerging demand. Many people are choosing to explore diverse travel scenarios on their own as consciousness and preferences are shifting.
Another travel segment that is generating more visitors is multigenerational tourism. It has become increasingly common to see young families traveling with extended family, especially if there are small children in tow. Escalating multigenerational tourism is becoming a subdivision across the mounting travel market. This segment also diversifies conventional hotel and resort guest demand. Since, multigenerational travelers have a variety of different guest needs. This impacts occupancy types, RevPAR levels and traditional KPI factors.
Investment and Opportunity
New development in undersized markets requires careful planning with the city and local officials. Introducing new property construction, expansions or renovations involves a delicate balance of partnerships and provisions to avoid straining local resources. The key to developing these assets is knowing how to integrate the trends of today with emerging demands of tomorrow. It’s also critical to keep in mind, the long-term impact these developments would have on the local community, its resources and city infrastructure.
With substantial and consistent spa and wellness market growth, many hotels and resorts have found it vital to develop distinct spa, wellness and leisure programs in order to remain relevant and compete. These features can greatly influence the guest experience. For example, spa treatments and wellness services can complement recreational activities, food and beverage programs and meeting and group business. Moreover, less developed cities with natural amenities often lack upscale hotel and resort lodging selections. Thereby curating unique programs and services can create mutual benefit, support community, and stir an innovative sense of adventure.
The cumulative prominence of nature, National Parks and recreation, across third and fourth tier U.S. cities introduce increasing opportunities for new hospitality and leisure growth. Moreover, finding elevated lodging options in these markets can be a common challenge. These facets hold an abundance of opportunity in less traveled, under-developed markets.
Wellness tourism has been on the rise since 2012. According to the Global Wellness Institute Wellness Tourism grew at an average annual rate of 6.5% between 2015-2017. This market was estimated at $639.4 billion globally in 2017. Moreover, wellness tourism was reported in 2018 to be growing at twice the rate of general tourism.
This emphasizes the urgency to address overcrowding tourism issues in tandem with new hospitality and wellness growth. A recent report released by The UNWTO Center of Expertise, Leisure Tourism and Hospitality offered a simplified list of eleven potential solutions to manage overtourism congestion. The report is titled Understanding and Managing Urban Tourism Growth beyond Perceptions. The profile includes interesting data points and eleven Strategies to Manage Visitor Flow.
While there are a variety of tourism management suggestions, many of these tasks lack the process structures necessary to effectively integrate swift conversions. This inevitably can create holes in the process that stagnate the conversations needed to make progress. The energy and effort to develop a new hotel or resort can take years of planning. The same is true in regard to restructuring regulations, enacting new policies and protecting natural resources.
Strategies to manage visitors in the short-term, positioned to enhance value and stimulate growth in the long-term, are ideal. Short-term goals might include creating new guest programs and package types and allocating time segments for special activities and tour excursions. There are also rewarding and creative ways to collaborate with local business partners and create new outlets and extensions of the guest experience.
Alliances and Local Support
Local support and proper planning can heighten the prospects to develop. This also increases mutual benefit and the ability to reach shared goals. Spa and wellness programs can play an important role as implements of relaxation, wellness and tradition. As travel dynamics evolve, it becomes increasingly important to adjust property assets appropriately. Gaining local support and forming new partnerships is a critical part of this. Since being prepared to back important lifestyle elements and well-being have notable long-term worth.
When it comes to any hotel or resort development the communication between local residents, township governance and developers are vital conversations to have. This helps to manage and protect local resources and popular tourist attractions. This also supports the local workforce, business relationships and good-will.
Nature has become a pillar of the Prescription Rx for improved physical, spiritual and mental well-being. Hence this is accelerating preferences towards destination travel, scenic landscapes, and escapes in nature. As more people seek to explore areas of popularity, novelty and nature, overtourism challenges may be increasingly challenging. However, as crowded conditions become less appealing and more people seek more environmental experiences, we can expect to see the rise of third and fourth tier hospitality growth. With mindful planning there are a variety of ways to develop these assets with extraordinary outcomes for the future.
By Mia A. Mackman