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The Business of Leisure
Where entertainment meets economics in a trillion-dollar global playground.
Gabe Azar
August 06, 2024 • Estimated Reading Time: 19 minutes
- the business of leisure -
Every year, thousands of local economies are stimulated by millions of tourists. Hobbies have provided fulfillment for millions, fostering communities and creating thousands of employment opportunities. The entertainment and media sectors have long generated captivating content by building loyal communities and generating billions in annual revenue.
The Leisure industry has surpassed an annual value of $4.5 trillion with projections to surpass $5.5 trillion by 2027. The sector has become a vital part of global economies. Encompassing sectors like travel and tourism, sports and fitness, entertainment and media, and hobbies and recreation. These industries play significant roles in shaping country economies and enriching lives across the world.
This blog will explore the global economic impacts and evolving strategies of the leisure industry. Exploring the aspects of developing consumer behaviors, technological advancements, economic impacts, market trends, technology’s role in change, challenges and opportunities, modern business strategies, and the industry's future outlook.
Global Wellness Economy
Economic Impact of the Leisure Industry
In 2023 the leisure industry represented 5% of the global GDP, the growth often outpaces many countries' entire GDP. This highlights its importance as a global economic factor. The business of leisure not only contributes to a GDP but it creates rippling effects and impacts throughout the global job market, and local economies, fostering communities through shared interests.
The contributions from the travel and tourism sectors have become vital to many countries and communities across the globe. These sectors include airlines, hotels, cruises, and all services related to the extensive job market and opportunities that drive the background infrastructure. In 2022 travel and tourism activities generated over 4 trillion dollars in economic impact globally.
The global sports industry has been valued at more than $500 billion in 2022 while the fitness industry alone is worth almost $100 billion globally, with steady growth projected. Major sporting events like the Olympics and the World Cup have been known to generate billions of dollars of positive economic stimulants for the host cities. With even smaller events becoming more popular like the NFL draft, generating over $200 million for the city of Detroit and surrounding areas.
The global entertainment industry has seen rapid growth post-pandemic, sectors include film, television, music, publishing, and video games. There have been many direct and indirect economic benefits, the most recent Taylor Swift Era Tour has generated over $5 billion for the U.S. economy. The combined movie box office revenue is expected to continue to grow to $50 billion by 2027.
Hobbies and recreational hobbies cover a diverse range of interests, from gardening to video games. A major part of the sector is global toys and the video game market which collected over $290 million in revenue in 2022.
The leisure industry is responsible for 1 in 10 jobs globally. The industry has continued to grow in tourism with every high-paid job creating 1.5 leisure industry-related jobs. Seasonal and part-time employment within the sector has provided critical income in developing communities. Stimulating local economies through increased consumer spending, infrastructure development, and investment attraction.
2023 NFL Draft in Detroit
Consumer Behavior and Market Trends
Covid has significantly influenced consumer behavior in the leisure industry, leading to several emerging trends across the sectors like sustainable and eco-friendly travel, home fitness and digital wellness, streaming services and digital entertainment, and DIY and at-home hobbies. The changes in daily behavior created new priorities for many with the hobby world seeing an explosion in popularity.
In recent years many customers have preferred eco-friendly choices when making their purchase decision, these preferences have even made their way into the travel industry. Companies like Airbnb and Intrepid Travel have created sustainable options for customers looking to stay green during their travels. There is also a growing trend of ‘slow travel’ where customers will spend more time at fewer locations to lower their carbon footprints and support the local economies.
With gyms being closed during the pandemic there was a surge in at-home fitness solutions. Many companies like Peloton, Mirror, and MyfitnessPal saw major increases in short-term demand and revenues. These companies offered virtual workout classes and programs to customers. The global fitness app market is expected to grow to over $13 billion in total revenue by 2025.
There has been an increased demand for digital entertainment streaming services with Netflix, Disney, and Spotify all experiencing major growth in users. Disney reached over 115 million paid subscribers in 2021. Many streaming companies have begun to invest in their original content with the rise of niche content targeting specific interests.
Home fitness gym
Companies like Etsy have seen major increases in traffic and revenue due to the increased demand for crafting supplies. Since 2020 there has been a notable rise in DIY and at-home hobbies like cooking, gardening, crafting, and gaming. The growth in gaming is expected to reach over $268 billion in total revenue by 2025, with a majority of the sales coming from brands like Nintendo, Sony, and Microsoft.
Younger generations including millennials and Gen Z have begun to prioritize experiences of material goods. Favoring travel, fitness, and digital entertainment with their friends of material items. These generations also care more about brands' policies and sustainability commitments.
Leisure spending has increased amongst all classes with luxury spenders beginning to spend more on travel, fitness equipment, and premium streaming services. With lower-income groups focusing on more affordable leisure activities, Hulu and Roku started to offer more cost-effective streaming services and products.
Urban areas have seen a higher per-capita spending on leisure activities due to a greater disposable and more options than rural areas. In urban settings, more businesses can thrive like Soulcycle, Escape Rooms, rooftop bars and entertainment facilities, and cultural institutions
While rural areas have access to more open spaces that can influence their choice of leisure activities. In rural areas, you will find more people taking care of their lawns with John Deere equipment, or buying gear for their off-road vehicles at Cabelas, a store that caters to the outdoor enthusiast. Geographical factors play a crucial role in shaping the landscape of the leisure industry influencing both behavior and business strategies across different regions.
Anthracite Outdoor Adventure
Technology's Transformative Role
Technology has continued to revolutionize the leisure industry, altering traditional business operations with advancements in digital platforms, VR and AR, esports, online gaming, gambling, and artificial intelligence. These technologies have empowered companies to enhance customer engagement, create new revenue streams, and provide personalized experiences.
Digital platforms have become a major role in the leisure landscape, allowing companies to introduce new ways for customer engagement, distribution, and monetization. Distribution channels have transformed how products and services are delivered, making them more accessible and convenient for customers.
Augmented and Virtual Reality technologies are creating new exciting experiences that transform how people engage in the tourism, entertainment, and shopping sectors. Gaming and cinema companies leverage VR tools like Oculus and PlayStation VR, while clothing companies and online retailers use AR to allow customers to visualize products in their homes or try on clothing virtually. AR is also enhancing tourism apps with real-time information and interactive experiences.
In recent years esports and online gaming & gambling have exploded attracting millions of viewers and participants who spend billions per year. Both Esports and online streaming platforms have offered users ways to generate revenue through sponsorships, advertising, and merchandise. Supporting professional gamers, streams, and content creators and now creating thousands of career opportunities.
AI allows companies across the luxury industry to enhance consumer experiences with personalized experiences and optimize their services. AI-driven tools have been used to create personalized gaming, virtual tours, and interactive media providing engaging experiences for customers. Many companies also use AI tools to improve customer experience and support, streaming support questions and reservations and enhancing user efficiency.
In the years to come, technology, especially AI, will continue to transform the leisure industry. Companies that invest in their digital future will be better positioned to thrive in the competitive digital economy, as personalization becomes increasingly essential and customers embrace technological advancements.
Virtual reality game
Business Strategies in the Modern Leisure Industry
Adapting to the digital world has become essential for businesses to remain competitive and meet the constantly changing demands of customers. This involves new ways to streamline operations, enhance customer experience, and optimize brand strategies.
Companies like Airbnb and Booking.com have continued to build out innovative features to attract and retain customers. Airbnb allows customers to book local tours and activities while Booking.com has expanded its app tool to offer more personalized recommendations to create a more streamlined experience. Hilton has launched an AI-powered chatbot “Connie” that acts as a robot guest concierge that helps guests book services.
Personalized customer experience is a major priority in the leisure industry, driven by the use of big data and advanced analytics products. Spotify has begun to analyze user data to create personalized playlists and recommendations based on engagement. Marriot Bonvoy and Delta SkyMiles have both tailored rewards and offers towards frequent flyers in hopes of increasing loyalty, repeat booking, and enhancing overall customer experiences.
Sustainability has become a key focus across the leisure industry, with businesses adopting eco-friendly and sustainability practices to appeal to conscious consumers. REI and Patagonia work with local organizations to promote outdoor conservation and sustainability initiatives within their supply chains.
Many businesses are exploring consolidation, diversification, and merger and acquisition opportunities to expand market presence, mitigate risks, and capitalize on new opportunities. In 2021 Amazon acquired MGM Studios to take advantage of their content library for their Prime Video. Lululemon acquired Mirror, a home fitness company, expanding its product offerings beyond fitness apparel to fitness equipment and digital content.
Leisure brands and businesses must continue to adapt to the digital world to enhance customer experience, sustainable initiatives, and consolidation strategies to remain competitive. Companies that embrace these initiatives are likely to lead the way and can ensure market relevance and success in an increasingly dynamic market.
All-Inclusive Vacations by Marriott Bonvoy
Challenges and Opportunities
The leisure industry continuously faces challenges, as customers often prioritize essential expenses over leisure and discretionary spending. Additionally, uncertainties related to regulatory challenges, emerging markets, and innovation within business models require companies to adapt. Leisure companies started to adapt value-oriented packages to attract budget-conscious customers that can help optimize revenue.
With global increasing inflation, cost of living, and reduced disposable income. There has been an increased amount of experience-based spending. Economic pressures have led companies to offer low-cost and free experiences to a new audience. Companies have begun to offer tier-based pricing strategies that cater to different customers, ensuring product affordability without compromising on quality.
Customers have become concerned with their data privacy as well as brands' environmental projections. Strict data protection laws have required large investments in digital and data security systems. Companies are also adapting to sustainable practices and policies to help them attract eco-conscious consumers. Patagonia has leveraged its sustainability commitments to a strong brand with loyal customers.
Markets in Asia, Africa, The Middle East, and Latin America have shown significant growth potential in the leisure sector expansions due to rising disposable incomes and an increase in urbanization. Brands must tailor their products and services to meet the specific needs and preferences of their local customers. Understanding and respecting cultural nuances is critical for success in entering new markets.
The rapid pace of change in the leisure industry requires constant investment in innovations, training, and infrastructure to remain competitive. Sector dependent, brands have begun to take advantage of subscription-based methods, unique product offerings, and creating personalized experiences that cater to customer needs.
The leisure industry is constantly under pressure facing challenges through economic uncertainties, regulatory and customer pressures, emerging markets, and the need for constant innovation. Companies that balance customer-centric and sustainable practices will be well-positioned to lead the future of the leisure industry.
Recent Industry Examples
The leisure industry includes a vast range of activities and brands, ranging from gaming & entertainment to sports and social experiences. Companies operating in these sectors have faced significant challenges in recent years due to the pandemic. During the pandemic, Roblox thrived through the nature of their digital business, Norwegian Cruise Lines had a hard struggle to adapt to the changing world policies, and Topgolf emerged as a disruptive sport mixed with social experiences.
Roblox founded in 2004, allows users to create and play games in virtual worlds using its proprietary game engine, Roblox Studio. The game has a virtual currency ‘Robux’ which can be earned or purchased with real currency to purchase in-game assets. Covid-19 significantly boosted Roblox's user base as people turned to online entertainment during the lockdowns. Roblox went public in 2021, showing strong user growth and its growing influence in the gaming industry.
Roblox
Norwegian Cruise Lines is a major player in the cruise line industry, they offer an array of cruise experiences for customers around the world. NCL faced substantial revenue declines in 2020 and 2021 because of Covid-19 and the forced lockdowns. During the lockdowns, NCL accumulated a significant amount of debt as well as striker health and safety requirements that required significant investments. Norwegian Cruise Lines eventually had to raise capital through debt and equity offerings to stay liquid during the shutdowns.
Topgolf merged with Callaway Golf Company in 2021, Topgolf is a sports entertainment company that combines a traditional driving range with social and interactive features. Founded in 2000, Topgolf includes dining and drinking options making it popular for social gatherings and events. The company rapidly expanded across the United States and internationally, boasting $1.5 billion in revenue in 2023.
Roblox, Norwegian Cruise Line, and Topgolf can offer valuable insights into the ever-changing nature of the leisure industry. Roblox has shown the power of a growing digital platform and user-generated content. Norwegian Cruise Lines has faced continuous challenges since the lockdowns, which shows the importance of adaptability. Topgolf innovated two normal social experiences with technology to create disruptive experiences for golf enthusiasts raking in almost $2 billion per year. Companies that can quickly adapt to changing conditions will have more opportunities to navigate future challenges and new opportunities for growth and innovation.
Future Outlook
The leisure industry is primed for continued growth over the next decade which technological advancements, consumer preferences, and the increasing focus on sustainability within the supply chain will drive. Technological advancements will reshape how activities are designed, marketed, and consumed. Companies that embrace these changes will thrive in the rapidly evolving world.
In the years to come the difference between AR and VR activities will continue to shrink. Theme parks are starting to use VR in rides that blend physical sensations with physical worlds, and augmented reality is being used to give tours in museums and historical sites. There has also been a rise in hybrid events that combine in-person and remote participants.
Eco-conscious customers consistently support brands that implement eco-friendly and sustainable policies within the company's supply chain. With the rise of micro and flexible experiences such as day trips or ‘staycations’, popup entertainment venues have begun to gain popularity in recent years.
Since the pandemic, customers have taken ownership of their health. Health and wellness have become incorporated in a wider range of sectors and leisure activities. Wellness-focused resorts have become more popular with the integration of mental support into entertainment platforms, and the growth of the biohacking experience.
Do Fitness Trackers Improve Your Health
The leisure industry is projected to surpass $5.5 trillion in annual revenue by 2027, playing a crucial role in global economies through sectors like travel, sports, entertainment, and recreational activities. This industry has been a local economic driver, creating jobs and fostering communities through shared interests. Covid-19 has accelerated the growth of trends across industries from trends like personalization, sustainability, and the integration of health and wellness into the leisure sector.
In the years to come businesses, consumers, and policymakers will have to embrace technological innovations such as AI, AR, VR, and blockchain. Additionally, the focus is on sustainability and implementing and supporting eco-friendly practices to support the environment. The leisure industry is expected to grow and innovate by balancing innovation with environmentalism and social responsibility, creating a vibrant and engaging future for all stakeholders.
Overall the industry has a bright outlook with all the opportunities for growth and innovations. Businesses, consumers, and policymakers must work together to navigate challenges to capitalize on all the opportunities ensuring success across the industry and global economies.
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