Gen Z Gives Surprising Boost to Some Hotels

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With youth unemployment at record lows and paychecks getting fatter, people born between 1997 and 2012, are financially better off than young people in earlier eras. Some hotel brands are benefiting.

Generation Z is defying stereotypes – and they’re spending on hotels.

“We can feel that the generation is spending money,” said Alastair Thomann, CEO of the Generator and Freehand hotel brands whose core demographic is guests ages 18 to 28.

“We’ve seen the requests coming into our reception change in recent years, as young customers want local recommendations for fine dining, which was something we hardly ever saw before,” Thomann said.

Last year, Generator and Freehand hotels saw a 15% revenue jump. This year, bookings are growing at a pace of over 40% in Amsterdam, Miami, Barcelona, Madrid, and New York. The company credited much of that growth to resilience in spending by Gen Z, people born roughly between 1997 and 2012.

“There’s a part of that generation that just weren’t allowed to travel in their formative years because of the pandemic, so they’ve developed an appreciation for it and would rather cut other budgetary items first,” Thomann said.

Generator Washington DC Lounge 1
A lobby area at the Generator Hotel in Washington, D.C. Source: Generator.

Other hotel companies have noticed Gen Z’s spending power, too.

“We are focusing on creating experiences that appeal to Gen Z, including innovative design, social media engagement, and sustainability practices,” said Martine Gerow, chief financial officer of the French hospitality giant Accor, during an earnings call last month. “This is crucial as this generation is becoming a significant part of our customer base.”

Gen Z is willing to trim spending elsewhere to preserve their travel budgets, with more than half preferring to cut dining out, shopping, and coffee rather than trips, according to an April survey of hundreds of youth in 10 Asian Pacific countries supported by Marriott.

Relatively less debt

Gen Z are financially better off than young people in prior generations. Youth unemployment in the world’s 7 most well-off countries is about 13%, the lowest since 1991, according to the Organization for Economic Co-operation and Development.

It’s conventional wisdom in the U.S. that today’s youth are burdened by student debt, with an assumption that Gen Z is limited in its ability to spend on travel.

Yet some statistics suggest a different picture. The Biden Administration has canceled at least $870 billion of student debt, roughly equivalent to all U.S. federal spending on higher education in history. Perhaps not coincidentally, Americans under 25 spent only 43% of their post-tax income on housing and education, including interest on debt from college, in 2022 — below the average for people in that cohort since 1989.

Broadly speaking, Gen Z is working fewer hours on average than previous full-time employees in their age group, according to a cross-country study by the International Monetary Fund. In other words, they have more time to travel.

“In 2019, we saw more people going to a 7-Eleven and then trying to bring a drink inside our hotels,” Thomann said. “It’s very different now. Guests are spending on our food and beverage much more. Inflation has forced us to push up our prices, but we’ve been able to pass it along.”

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