Payments to Priorities - The U.S. Traveler Mindset in 2025 | #Phocuswright research
Summary
Alicia Schmid, Director of Research at Phocuswright, presents findings from the firm's latest consumer travel research covering three key areas: payment method evolution, the behavior of high-spending 'indulgent explorer' travelers, and the impact of geopolitical uncertainty on U.S. travel intentions in 2025.
On payments, Schmid notes that credit cards remain dominant with six in ten travelers using them as the primary payment method for air, hotel, car rental, and in-destination activities. Cash persists mainly for in-destination spending. However, newer methods — online payment platforms (PayPal), mobile payment services (Apple Pay, Google Pay), and digital wallets — are growing rapidly and may soon surpass cash and debit. Generational segmentation is stark: Baby Boomers remain firmly attached to credit cards and are unlikely to adopt new methods, Gen X has adopted online payment platforms but lags on other newer types, while Gen Z and Millennials are the primary drivers of digital wallet and mobile payment growth. Across all generations, ease and security are the top decision factors for choosing a payment method, followed by purchase protection and rewards. The clearest differentiator for newer platforms is fast refunds — a feature valued not just by younger cohorts but by Gen X dealing with rising costs. Schmid's strategic advice for travel brands: table-stakes factors like ease and security won't win share — differentiate on rewards programs and the speed of transactions, especially refund velocity.
The second focus is 'indulgent explorers' — a cohort Phocuswright defines by high per-person, per-day spend. These travelers take an average of 4.7 trips per year, with 40% taking at least one trip of 14 or more days annually, and are significantly more likely to take international trips. Their motivations go beyond the mainstream: exclusive experiences, adventure travel, and wellness are prominent alongside the typical rest-and-relaxation and visiting friends and family. For destinations, indulgent explorers are more likely than average to visit safari destinations and deserts — less common trip types that travel brands can use to capture their attention, often securing the full trip booking as a result. Critically, six of the seven top research and planning resources for this cohort are offline — including calls to travel suppliers, travel advisors, and print media. OTAs appear mid-list. These travelers use travel advisors because of trust, high spend levels that feel too significant to book online, and the desire for white-glove service and package bookings (they are twice as likely to book packages). Despite this, they are slightly more tech-savvy on payment methods, with lower credit card dependence and broader adoption of newer forms. They also have high rewards program membership and redemption rates. Schmid notes that in economic downturns, higher-income travelers like indulgent explorers are comparatively insulated — 'higher equity brands will gain share in a down economy' — and this cohort remains resilient, continuing to book and upgrade despite financial headwinds.
On geopolitical uncertainty and shifting discretionary priorities, Schmid flags a notable shift: for the first time since at least 2018 (pre-pandemic), electronics and home improvements have displaced travel as the top discretionary spending priority for U.S. consumers. Phocuswright is watching whether this is a temporary or generational shift. If travelers do need to cut back, at most 25% would take fewer trips; most adjustments would occur in-destination, particularly around shopping and dining. Comfort with domestic travel is holding steady year-over-year, but comfort with international travel has declined slightly, even among frequent travelers. Indulgent explorers show the highest concern about safety abroad — an irony given their high travel frequency. Schmid concludes that travelers are likely to respond by staying closer to home, choosing more stable-seeming destinations, and building in booking flexibility rather than canceling plans altogether.
Key Takeaways
- •Differentiate on rewards and refund speed — ease and security are table stakes that won't move the needle for payment platform adoption among travelers.
- •Fast refunds are a key payment feature valued across generations, not just younger cohorts — Gen X dealing with rising costs also prioritizes getting money back quickly.
- •To capture high-spend 'indulgent explorer' travelers, market niche experiences (safaris, desert destinations, adventure, wellness) — these less common trip types are what get their attention, and capturing them often secures the full trip.
- •Six of the top seven planning resources for indulgent explorers are offline — travel suppliers and advisors should invest in offline channels and direct outreach, not just digital marketing.
- •Indulgent explorers are twice as likely to book packages and prefer travel advisors for high-value trips due to trust and desire for white-glove service — this is a strong signal for the advisor channel.
- •Higher equity travel brands are positioned to gain market share during economic downturns, as affluent travelers remain relatively insulated from consumer confidence dips.
- •The first post-2018 shift away from travel as the top discretionary priority (toward electronics and home improvements) should be monitored — it may signal a structural generational change.
- •If travelers cut back due to economic pressure, they are more likely to reduce in-destination spending (shopping, dining) than to cancel trips altogether — protecting bookings is more achievable than protecting total trip spend.
- •Baby Boomers are largely set in payment habits and won't adopt new methods — marketing newer payment technologies should focus energy on Gen X, Millennials, and Gen Z.
- Frequent and high-spending travelers are paradoxically the most concerned about international safety — brands should address safety perceptions explicitly in communications targeting these high-value segments.
Transcript
For the last couple of years, one of focus writes research sessions focused on travelers use of AI. We thought surely everyone is tired of hearing and talking about Genai in travel. But in all seriousness, there's a lot of talk about AI going on this week. You heard some of it during the opening yesterday. and focus right just published a research report with the most recent findings from the consumer travel report focused on travelers use of AI that we encourage you to check out. So instead thi...
