As the leisure and travel industry continues to see a pullback, consumers are rapidly changing their spending habits. This trend first gained attention in early May with the question, “Is Consumer Travel Spending Easing?” – BofA Identifies New Trend As Travel Companies Miss Earnings. With the Biden-Harris economy losing momentum and recession risks on the rise as the labor market cools down, airlines, hotels, short-term rental platforms, and theme parks are sounding the alarm bells about an impending consumer downturn.
The signs of a slowdown in consumer spending are abundant across various sectors. Peter Callahan from Goldman Sachs discussed this phenomenon in a note to clients on Sunday: “Travel trends clearly deteriorating into July/2H (EXPE / ABNB 2H moderation, DIS Parks/Experiences saw a moderation of consumer demand, FOUR calling out restaurant weakness in July) – debate is if they are now ‘de-risked’ into 2H or if the market will need to wait to see if we go ‘below’ trend before normalizing (as many other categories impacted by COVID have done – e.g. e-commerce.
Evidence of a slowdown in consumer spending is ubiquitous, particularly among individual companies. The pent-up demand for travel that emerged during the Covid era has now dissipated as consumers grapple with high inflation and interest rates, maxed-out credit cards, and depleted personal savings in an economic environment where even Vice President Kamala Harris admits that Bidenomics has failed.
New website tracking data from Similarweb cited by Bloomberg shows a significant decline in consumer web searches for rooms, flights, and cruises in recent quarters. This trend is further supported by management teams at major corporations such as Airbnb, United Airlines, Delta Air Lines, Spirit Airlines, Frontier, Walt Disney, and Expedia Group, all of whom have been warning about a slowdown in consumer spending.
Just last week, Expedia cut its annual outlook for the second time this year due to worsening consumer softness. And days ago, Hilton CEO Christopher Nassetta told investors, “The lower sort of half of consumers, maybe even the lower three-quarters, have less disposable income available and less capacity to do anything, including travel.
Although Bloomberg notes that “demand for travel isn’t collapsing,” the fact that consumers have been pulling back on their spending for months is a worrisome sign that the economy may be heading in the wrong direction. The combination of elevated inflation, high interest rates, and reduced consumer confidence has led to a significant shift in consumer behavior, which will likely continue to impact businesses within the leisure and travel industry.
