After the surge of revenge travel in 2023 and normalization in 2024, the travel and leisure industry is poised for growth in 2025, driven by a strong consumer sentiment to re-discover the world. Travel is expected to be the top discretionary expense across the US, UK, Germany, China and India, with global travelers intending to increase their spending by nine percent on average compared to the previous year.¹

Today’s digital-native travelers are seeking fresh, tech-enabled experiences that elevate their journeys. Companies that used the pandemic-enforced downtime to strategically re-calibrate their business – by adopting innovative technologies and developing new capabilities – wield a competitive edge in this market. A market impact report conducted by HFS in partnership with WNS analyzed the airline, airport, hotel and Online Travel Agency (OTA) sectors, revealing key strategies that leaders are adopting for the next growth phase.

Here, we explore six transformative trends set to re-define the travel and leisure industry in 2025.

1. Elevating Experiences: Immersive Technologies & Advanced Analytics

Industry leaders are leveraging sophisticated technologies to meet evolving customer expectations. Virtual Reality (VR)² will take center stage in 2025, offering immersive destination previews that allow travelers to ‘try before they buy.’ Underscoring the demand for richer and more interactive experiences, one digital marketing company found that two-thirds of the people in its survey wanted virtual tour services, while some 50 percent of adult internet users relied on virtual tours to make a booking decision.³

However, the industry faces a critical challenge in balancing innovation with operational efficiency. The HFS-WNS report highlighted a digital dichotomy, where companies must scale up rapidly while navigating budget constraints. Strategic investments in innovation – spanning functional, enterprise-wide and ecosystem-driven transformations – will be key to creating seamless, customer-centric experiences and drive long-term value creation.

As enterprises upgrade their critical capabilities, strategic partners will play an active role in deploying advanced analytics and intelligent automation. They will help travel and hospitality companies glean actionable insights around customer expectations, align transformation efforts, unlock new value streams and future-proof their business.

For instance, a leading corporate travel management company struggled to find the root causes of customer dissatisfaction, limiting its ability to improve service quality. Partnering with a domain and digital expert, the company leveraged their advanced analytics-as-a-service platform to gain deeper insights. This enabled enhancements to its BOT framework for digital containment and streamlined payment processes, resulting in a 20 percent increase in digital deflection and a 10 percent drop in negative sentiment calls – demonstrating the power of analytics in shaping superior customer service.

2. Hyperpersonalization: Re-defining Customer-centricity

Businesses are harnessing customer data in new ways to deliver hyperpersonalization and build brand loyalty. According to the HFS-WNS report, personalization (31 percent) has surpassed safety and wellness concerns (29 percent) as the top customer expectation. A Skift report⁴ further reveals younger travelers’ support for this trend, with 81 percent of Gen Z and 57 percent of millennials favoring personalized ads.

Leading travel firms are moving beyond traditional segmentation, leveraging Artificial Intelligence (AI)-driven insights to offer real-time, context-aware personalization. However, legacy systems and fragmented operations remain significant barriers: 33 percent of organizations surveyed in the HFS-WNS report identified breaking out of functional silos as the top operational change needed to meet evolving customer expectations.

Travel providers must re-think their operating models, placing customer-centricity at the core. For instance, an OTA⁵ has found that using AI to segment data and refine search results significantly optimizes booking efficiency. Instead of overwhelming users with hundreds of flight and hotel options, their solution presents a short, curated list of personalized recommendations – leading around 40 percent of users to select the top option. The firm plans to integrate virtual assistants capable of “remembering” customer interactions and offering increasingly personalized recommendations.

3. Augmented Expertise: The Human-AI Synergy Transforming Travel Experiences

With rising mistrust in global institutions, travelers are once more turning to trusted experts for guidance in a noisy landscape. The human touch remains critical. One survey showed that 85 percent⁶ of luxury travelers consider travel advisers essential for securing personalized high-end experiences.

In 2025, digital technologies will augment human talent, re-defining operational excellence. Generative AI (Gen AI) will play a pivotal role, enabling agents to curate personalized itineraries, power recommendation engines and enhance productivity. Early adopters are integrating Gen AI with traditional AI solutions to deliver hyperpersonalized guest experiences via chatbots, multi-lingual support and intelligent agent-assist tools.

In fact, Gen AI-powered, Natural Language Processing (NLP)-based decision support systems are already proving valuable in enhancing knowledge management and streamlining agent workflows, reducing response times and improving service efficiency. However, 45 percent of industry leaders cite data quality and management as a key challenge in ensuring Gen AI’s effectiveness. This is where strategic partnerships with experienced digital transformation service providers can ensure that such solutions are tailored to an organization’s data ecosystem and needs.

4. Beyond the Journey: Technology’s Impact on Pre and Post Travel Experiences

In today’s experience economy, consumers expect seamless experiences before, during and after their trips. This is shaping a new approach to customer loyalty. Airlines and hospitality brands are leveraging predictive analytics, AI, Machine Learning (ML), NLP and the Internet of Things (IoT) to conduct behavioral profiling and offer ancillary services through the right channels.

Gen AI enhances traveler experience at every stage, curating personalized itineraries pre-departure, optimizing transportation and booking adjustments during the journey and gathering feedback to refine future recommendations post-trip. Real-world applications like dynamic pricing⁷ and AI-powered travel assistants⁸ are becoming commonplace, while Gen AI is gaining popularity for personalized communication⁹ to ensure relevant and efficient customer interactions. One airline¹⁰ has even integrated Gen AI to provide passengers with real-time weather-related flight updates, offering live radar maps and localized weather details along flight paths.

5. Sustainability: A Priority for Travelers

Travel and tourism account for about 6.5 percent of carbon emissions globally,¹¹ with trends indicating progress toward emissions reduction. The energy used to fuel operations remains a primary source of carbon output. In response, travel firms are increasingly collaborating with service providers to develop sustainability roadmaps, with 51 percent in the HFS-WNS survey seeking specific technology solutions to address challenges, such as the carbon footprint associated with a travel ticket.

Travelers are playing their part by increasingly exploring smarter, more sustainable choices. In 2025, sustainable travel will gain traction, with consumers favoring responsible tourism and ‘slow travel’ over destination-hopping itineraries. Companies are introducing CO2emission sorting tools, carbon offset suggestions and transparent emission tracking to inspire environmentally conscious habits.¹²

These developments are not just about meeting customer demand; they also present a significant opportunity for travel firms to unlock new revenue streams through partnerships. OTAs and hospitality providers can differentiate themselves by offering value-added services focused on sustainability, such as carbon offset programs, sustainable accommodation options and loyalty rewards tied to eco-friendly choices. Collaborating with service providers who bring the necessary technology and expertise will enable companies to innovate in ways that are both customer-centric and environmentally responsible.

The travel industry is now set to create an ecosystem of partners collaborating to generate new value sources. Partnerships will be crucial in driving this transformation, especially as companies adopt a more sustainable, customer-first approach. Prioritizing sustainability will not only help travel firms comply with regulations but also strengthen stakeholder relationships and gain a competitive edge in a packed market.

6. Evolving Traveler Demographics: The Rise of Gen Z and Millennials

The travel industry is experiencing a demographic shift, with Gen Z and millennials becoming dominant segments. By 2030, these cohorts are expected to account for over half of all US leisure trips, up from about a third in 2023.¹³ Their strong connection to technology and preference for value-driven purchases make them a key focus for travel providers.

Studies¹⁴ show that travel is a top priority for Gen Z and millennials in the US and Europe, helping insulate the industry from economic downturns. These younger travelers prioritize personalized experiences, seamless digital interactions and sustainability – often willing to pay premiums for eco-friendly options. Travel firms must adapt by embedding personalization, digital convenience and sustainable choices into their offerings.

The Way Forward

The travel and leisure industry is entering a new era driven by digital transformation and customer-centric strategies. To capitalize on 2025’s growth opportunities, companies must accelerate investments in advanced technologies like AI, Gen AI and immersive experiences.

Success will belong to those who combine smart solutions with the human touch while prioritizing sustainability and hyperpersonalized journeys that resonate with the next generation of travelers.

Contact our travel transformation experts to explore strategies that drive innovation and growth.

References

1. Global Travel Outlook: What to expect in 2025

2. How Virtual Reality is Transforming the Travel Industry

3. Virtual Tour Statistics

4. State of Travel 2024 Report by Skift Research

5. The-Promise-of-Travel-in-the-Age-of-AI.pdf

6. State of Travel 2024 Report by Skift Research

7. Dynamic Pricing a Necessity for Today’s Travel Industry.

8. Expedia launches AI travel assistant and creator shops in 40+ spring product slate – WiT

9. How AI is changing the way Cathay Pacific flies | Cathay

10. United Now Texts Live Radar Maps and Uses AI to Keep Travelers Informed During Weather Delays – Jul 3, 2024

11. Article | World Travel & Tourism Council (WTTC)

12. 5 Apps That Help You Track and Offset Your Carbon Emissions

13. CSMR_8577894_FutureofTravel_POV_FINAL_040324

14. State of Travel 2024 Report by Skift Research