Travel has an edge over shopping this holiday season amid inflation | Tech US News


Retailers have a new threat this holiday season: wanderlust.

Americans are returning to the skies, filling hotels, swarming theme parks and showing a willingness to spend more of their money on travel.

That’s setting up the fiercest battle for consumers’ wallets in the holiday season since before the Covid pandemic, with lingering inflation already straining household budgets during the retailers’ holiday quarter. Retailers are juggling other challenges: selling excess inventory, trying to appeal to consumers who have already bought a lot during the pandemic, and appealing to shoppers who have become more budget-conscious.

For the travel sector, it was a year of recovery. Delta Air Lines, Mastercard and Airbnb are among the companies enjoying windfall profits. Other companies also indicated a shift toward experiences and services. Living Nation reported double-digit growth in attendance at theaters, arenas, stadiums and festivals. Starbucks he said customers are looking for expensive drinks like pumpkin spice lattes.

“The trend toward experiential spending continues,” Mastercard CEO Michael Miebach said on a quarterly earnings call late last month. “We saw notable strength in spending in airlines, lodging and restaurants with a shift in categories such as furniture and appliances.”

The pullback in spending on goods already has some retailers warning of tougher times ahead. Amazon surprised investors in late October with a weaker-than-expected forecast for the end of the year as e-commerce growth slows, and the company announced a freeze on corporate hiring. Appliance giant swirl cut your estimates.

Shipping giant FedEx fell short of expectations in its September report. CEO Raj Subramaniam said he foresees a “global recession”. US retail sales USA were flat in September, a sign that inflation was taking its toll on consumers, as the figures are not adjusted for inflation.

Walmart, goal, Home Depot, Macy’s and others will deliver their own updates to investors in mid-November. Walmart and Target disappointed investors over the summer when they detailed the financial toll of excess inventory.

Permanent holidays

Travel spending has soared, in part due to flexible office policies that allow Americans to travel more and book tours to Europe well into the traditional off-season.

As of September, airline ticket sales were up more than 56% from a year ago and up 10.9% compared to the same month in 2019, according to Mastercard Spending Pulse, which measures in-store retail sales and online. Lodging sales are up more than 38% from a year ago, and up 42% compared to September 2019.

“I think that taking annual leave is a right for people,” Hawaiian Airlines CEO Peter Ingram said in an interview last month. “After being deprived of that for a couple of years when there were restrictions on the ability to move around, people are really embracing it and coming out.”

United Airlines CEO Scott Kirby noted that more relaxed office attendance policies also allow people to travel more.

“That’s why September, normally an off-peak month, was the third strongest month in our history,” he said on the company’s earnings call.

Appetite for travel persists despite rising airfares, which have been fueled by pilot shortages and delays in aircraft deliveries.. Executives last month also said many people are even willing to pay for roomier seats. Air fares rose 43% year over year in the latest US inflation reading.

“Travel remains very resilient,” said Anna Zhou, an economist at the Bank of America Institute. Even after Labor Day, when travel typically slows down, “that’s not the case this year, especially for international travel,” he said.

For now, airlines are shrugging off concerns about the possibility of a recession.

“While there is noise about whether or not we’re in a recession or whether we might even be in one now, we haven’t seen any noticeable impact on our booking and revenue trends,” Southwest CEO Bob Jordan said of the 27 earnings October to call

‘Last Hurray’

Airlines and hotels are not yet seeing a slowdown in travel. But if a recession hits, that could jeopardize all consumer spending and prompt higher-income Americans to rethink big trips.

“Where we’re going to go a year from now, it’s hard to predict,” Hawaiian Airlines’ Ingram said.

Tim Quinlan, senior economist at Wells Fargo, expects the holiday season to be the “last hurrah” for consumers. It forecasts a 2% annual gain in holiday retail sales year over year in November and December when adjusted for inflation. This compares to an estimated 8.1% last year and an annual gain of 10.4% in 2020.

The bank originally projected a recession around Labor Day. However, unemployment has remained historically low. The US added 261,000 jobs in October, ahead of estimates.

Americans kept their spending down by lowering their savings rate, racking up credit card debt and drawing down savings accounts, Quinlan said. Soon, he said, they’ll have to start pulling back and making tradeoffs.

“People spend more than they earn and that’s kind of the definition of unsustainable,” he said. “The consumer is on borrowed time.”

Quinlan now predicts a recession in April, May or June.

The consumer is on borrowed time.

Tim Quinlan

Wells Fargo Senior Economist

U.S. credit card balances rose $46 billion in the second quarter, a 13% jump that was the highest in two decades, according to the St. Louis Fed. Louis. Both housing and non-housing debt have increased considerably since the start of the pandemic.

Credit card delinquency rates at the end of the second quarter reached 1.81%, the highest since the first quarter of 2021, according to the St. Louis. But that’s well below the historical average, and consumers are still sitting on healthy savings built up in the pandemic.

The National Retail Federation, a major trade group, joined other industry watchers on Thursday in forecasting more modest holiday sales, and said some of that spending will be financed by credit card debt and savings accounts rather than income.

Jack Kleinhenz, the group’s chief economist, acknowledged on a call Thursday that travel is also a spending priority for more consumers. However, he said he sees it as a complement, not a trade-off.

“You might say, ‘Well, heck, that should take away from retail sales because people are going to spend more on gas and on travel, on plane tickets,’ but at the same time, people bring food and gifts and hopefully they’ll spend more.” in clothes”.

Travel may not be seeing a drop, as people tend to plan and pay for trips months in advance, said Jorge Barraza, assistant professor of consumer psychology at the University of Southern California.

“It might be the kind of thing that people don’t realize how much prices have gone up and are willing to put up with it because there’s pent-up demand for travel,” he said.

And, he added, seeing friends or family post about their travels on social media can motivate people to book vacations, even if it means saving money.

“When you have moments of stress and uncertainty, we’re more likely to see that YOLO behavior,” he said, referring to the expression ‘You only live once.’


Source link

Please disable your adblocker or whitelist this site!