Meet Commerce’s New Global Engine: The ‘Traveling Class’

Mix together the growing emerging middle class from markets like China, Russia and Brazil, an aging but healthy population with money to spend and time on their hands, and digital technology that makes it easy for people to discover new places, and you’ve got the makings for an explosion in cross-border travel – and the commerce opportunities that travel with it.

Those are the findings of a brand new study from Visa which projects that international travel by households globally will increase dramatically over the next decade. The study combined current travel patterns of Visa-branded cardholders across the globe with industry estimates and forecasts for international travel.

Based on that methodology, Visa estimates that roughly 282 million households will plan at least one international trip every year. By the year 2025, these travelers will spend an average of $5,300 on each of those trips – an increase of nearly 35 percent over the ten-year period 2015-2025.

“Traveling internationally will become more common and attainable in the future thanks to changing demographics, and technology advances that make traveling abroad easier and less expensive,” Wayne Best, Chief Economist at Visa, told Karen Webster in a recent interview about the results. “What will emerge is an expanding ‘traveling class’ that will spend a growing portion of their household income on cross-border travel.”

Best attributes that growth – and the appetite to travel more generally – to the wanderlust that these emerging middle class households have now and will continue to have. The appetite for travel outside of their own countries is spurred, at least in part, by access to smartphones that make it easier to visualize what might await them in other parts of the world.

Now with the income to fund those trips, this “traveling class” will not only have the potential to swell the coffers of those in the hospitality industry, but those who operate the shops and restaurants in the cities and towns that these travelers visit. Once back home, those consumers can continue those relationships virtually by accessing their new favorite retailers from their digital devices.

Best also acknowledged that another key driver of this growth in cross-border travel is the aging of the population — those 65 and older who, as Best pointed out, is the fastest growing age cohort around the world. “Tomorrow’s traveling class will likely be older and hail from emerging markets, looking very different from today’s typical international traveler,” he remarked.

Regardless of where they live, those individuals will have both the money and the time to travel. One of those travel pursuits, Best suggested, will also be one of the newest travel trends – “medical tourism” – as these “elderly” travelers pursue options for medical care that is better and/or more cost competitive than what can be obtained in their home country.

Visa defines the traveling class to include heads of households with a $20,000+ annual income which Best also defined as the “tipping point” for spending on international travel. Best cautioned “not to apply U.S. standards to this new ‘traveling class’ demographic.” A much lower cost of living in these emerging countries, combined with the ability to earn more money, make it possible for someone at that U.S. income level to both live comfortably in their own country and spend on travel abroad. Visa estimated that by the year 2025, nearly half of all global households (945 million) will fall within this income range.

China tops Visa’s list as the country with the most potential spend coming from the “traveling class,” with Russia and Brazil also showing massive potential for growth.

Rank

Country

2015

2025

Percent Increase

1 | | | China | | | $137.0 | | | $255.4 | | | 86%
2 | | | United States of America | | | $101.0 | | | $134.1 | | | 33%
3 | | | Germany | | | $74.4 | | | $97.6 | | | 31%
4 | | | United Kingdom | | | $61.3 | | | $96.9 | | | 58%
5 | | | Russian Federation | | | $22.6 | | | $49.1 | | | 118%
6 | | | Hong Kong, China | | | $26.7 | | | $47.4 | | | 78%
7 | | | Singapore | | | $22.5 | | | $44.9 | | | 99%
8 | | | France | | | $37.4 | | | $43.9 | | | 17%
9 | | | Brazil | | | $18.3 | | | $37.8 | | | 106%
10 | | | South Korea | | | $21.1 | | | $34.3 | | | 63%

Best pointed out that it’s easy for everyone to lose sight of the sheer size of the growing middle class that’s taking place in these emerging markets, and the opportunity that this traveling class will afford those who are prepared to serve them. Best said that Visa hopes that this new data will be helpful in stimulating conversations with city and country leaders to invest in infrastructure such as airports and roads to capitalize on the influx of tourists that will emerge over the next decade.

“We’re at an unprecedented era where the next decade will be really substantial with the growing middle class,” Best said. “These findings are one element of that outcome. The fact is there will be a lot more people earning a lot more money – their prosperity is rising and the commerce opportunities that this will create will be unprecedented.”