Americans may be sick and tired of dealing with high prices across pretty much every aspect of their lives, but inflation hasn’t yet squashed the travel bug.
And this Memorial Day weekend could be a case in point: Travelers are expected to come out in record-setting droves.
US airports on Thursday saw their second-ever busiest day, as nearly 2.9 million travelers were screened at Transportation Security Administration checkpoints.
Friday was expected to be even busier, TSA said.
Traffic on the ground won’t be any less packed: AAA is projecting that a record 38.4 million people will take road trips over the long weekend.
Three-plus years of high inflation have taken their toll on Americans’ budgets and, especially, their mindsets. But even though people may be feeling pinched, some are still willing to spend — if not splurge — on travel and leisure.
“The truth is that although people complain about the economy and complain about inflation, overall, households are in very good shape in the United States,” Gus Faucher, PNC Financial Services’ chief economist, told CNN on Friday.
Inflation has slowed during the past couple of years, pulling back significantly from its peak of 9.1% in June 2022. In April, it measured 3.4% annually, according to the Consumer Price Index.
But it is still well above pre-pandemic levels: In February 2020, CPI measured 2.3% annually. Price hikes continue to hit hard, especially where consumers feel it most (their shelter, food and transportation). However, the job market is historically strong and incomes are outpacing inflation.
“People see [high gas] prices, and they feel like they’re not keeping up,” Faucher said. “But the truth is, they are. We see that very clearly in the consumer spending numbers.”
Consumer spending has increased for 12 consecutive months, Commerce Department data shows. And those pandemic effects still run deep: Americans are putting their cash, and their credit, toward experiences.
Disney’s parks and experiences revenue grew roughly 11% during the second quarter from the year prior. The company said that while attendance isn’t at the elevated levels seen following the end of Covid pandemic restrictions, it still rose at its US and Hong Kong Disneyland resorts.
But it’s not just Disney — consumers’ appetite for travel remains robust and is expected to ramp up as the summer season kicks off.
“Demand continues to be strong, and we see a record spring and summer travel season,” said Delta Air Lines CEO Ed Bastian during a call with analysts last month. “Delta’s core consumers are in a healthy position and travel remains a top purchase priority.”
United Airlines also said in April that it expects both the airline and industry as a whole to report record passenger volumes during the summer.
Credit some of that to Ms. Swift: United and Delta said this week that demand is on the rise for Taylor Swift’s “Eras Tour” destinations in Europe.
And there is some good news on the inflation front in that regard: Airline fares dropped in April from March and are actually down a little more than 1% from February 2020, CPI data shows.
Spending by land and by sea
Cruise transactions, which include bookings and spending on board, were 16% higher in the first quarter of this year compared to the first quarter of 2019, according to a recent Mastercard Economics Institute report.
The jump in cruise spending may be due to “persistent price increases in the hotel industry,” the Mastercard report said. That’s made cruises “a relatively more budget-friendly option in many cases.”
Yet, many large hotel chains say they aren’t seeing a significant pullback.
For instance, Marriott International raised its full-year earnings guidance in first-quarter results reported on May 1. The company saw its global revenue per available room climb 4.2% from the year before.
“Our 2024 outlook still assumes continued sturdy travel demand and a continuation of current macroeconomic trends,” said Kathleen Oberg, chief financial officer at Marriott, during a call with analysts.
However, nothing lasts forever.
Other key players in the travel industry have reported a similar trend this earnings season. Americans, especially lower-income consumers, have pulled back spending at retailers as goods inflation outpaces wage growth. They’ve even become frugal with some experience-based spending like dining out, opting instead to eat at home.
Still, some executives have warned that the appetite for travel doesn’t match the boom seen right after Covid pandemic restrictions were lifted, and that the boost from that period is fading.
Another source of potential woe is the uncertain economic environment. Pandemic-era savings have been spent while sticky inflation and high inflation rates eat into household budgets. The labor market has shown remarkable resilience through the Federal Reserve’s interest rate hikes, but it cooled in April.
Expedia Group lowered its full-year guidance, citing in part the slower-than-expected growth in gross bookings during the first quarter.
“We saw a healthy but more normalized market environment for travel globally,” CEO Peter Kern told analysts earlier this month. “We are largely past the pandemic-driven recovery.”
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