Structural factors contribute to these challenges. Negative perceptions regarding career prospects, work conditions and social status discourage job applications and contribute to high turnover. Historically, tourism wages have lagged behind those in comparable sectors73 and, in addition to irregular hours, T&T creates work–life challenges that many workers, particularly those in younger generations, find unacceptable. Despite these obstacles, the sector employs millions of youths and women at higher rates than other sectors, making it a platform for upward mobility and economic participation.74 However, while women represent a significant portion of the workforce, men continue to dominate leadership positions, and traditional gender stereotypes persist in role assignments.75 Addressing these disparities presents opportunities to build a more equitable and inclusive industry that fully leverages diverse talent. The sector faces important ethical responsibilities as one of the world’s largest employers. Modern slavery and human trafficking remain persistent risks in parts of the value chain. Estimates suggest that more than 27 million people are working under forced labour conditions with an increasing trend between 2016 and 2021. Service sectors (including hospitality, food and beverage, and entertainment, but excluding domestic work) rank among the top five industries accounting for adult forced labour, with 86% of cases stemming from private actors.76 Labour shortages damage reputations, limit innovation implementation and drive wage inflation without productivity increases, which particularly affects SMEs. This in turn can trigger service reduction, staff cuts and ultimately declining traveller satisfaction – causing a downwards spiral. Addressing these challenges requires a comprehensive approach that enhances the entire value proposition of careers through competitive compensation, work–life balance safeguards, a continuous learning culture and clear pathways for advancement. Organizations must reskill and upskill for evolving roles, create opportunities and responsibly manage technological transition. It is equally important to act on human rights risk through robust due diligence processes and ethical recruitment standards. Companies implementing strong human rights protections not only mitigate reputational and legal risks but also benefit improved worker satisfaction retention and productivity. Organizations and destinations that develop innovative, worker-centric approaches to talent management will gain competitive advantages while contributing to inclusive sustainable development.Local capacity-building Small and medium-sized enterprises (SMEs) form the backbone of the T&T sector, representing approximately 80% of businesses and forming a fundamental part of the traveller experience.77 Building their capacity is essential for creating broadly distributed economic benefits, enhancing destination distinctiveness and ultimately fulfilling visitors’ needs as numbers expand. In Organisation for Economic Co-operation and Development (OECD) countries, SMEs provide between 50% and 85% of employment.78 In Europe, more than 60% of total accommodation room capacity is supplied by independent providers.79 These businesses meet a growing traveller preference for authenticity, with 75% of travellers seeking local cultural experiences and 69% wanting their spending to benefit local communities directly.80 Data suggests that when people stay in STR accommodation, around 40% of travellers’ spend is in the neighbourhood surrounding the listing. This creates significant ripple effects that benefit other local businesses such as retailers, restaurants and service providers.81 Large hotels and tourism enterprises recognize the value of these SMEs to a destination’s or an experience’s appeal – Hilton spent more than $450 million with SME suppliers in 202382 while Norwegian Cruise Line Holdings reported more than $635 million in SME procurement across 35,000 global suppliers.83 Despite their importance, T&T SMEs face significant challenges that can limit their ability to participate fully in the sector and receive equitable benefits. Digital transformation gaps persist: a 2009–2019 study found that while large companies reached 83% of employees with online devices, small companies reached only 50%, with hospitality SMEs lagging further behind at just 32% (Figure 7).84 This digital divide restricts SMEs’ market access and operational efficiency. SMEs also struggle with regulatory burdens or to meet industry standards. A recent survey in the United States showed that more than 50% of small business owners report that licensing requirements hinder growth and 69% spend more per employee on compliance than larger competitors.85 Financial vulnerability compounds these challenges, as demonstrated during the COVID-19 pandemic when 50% of T&T SMEs feared bankruptcy within three months. Without targeted support addressing these constraints, there is a risk that T&T benefits will be concentrated among larger enterprises, undermining the authentic local character to which SMEs contribute and that travellers seek. Building local capacity through public- and private- sector initiatives is essential to create enabling environments for SME success.8 Travel and Tourism at a Turning Point: Principles for Transformative Growth 17

Travel and Tourism at a Turning Point 2025