Inflation isn’t stopping Americans from having fun this Memorial Day weekend

Inflation isn’t stopping Americans from having fun this Memorial Day weekend

Americans may be sick and tired of dealing with high prices across nearly every aspect of their lives, but inflation has yet to bite 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 busiest day yet, as nearly 2.9 million travelers were screened at Transportation Security Administration checkpoints.

Friday is expected to be busier, TSA said.

Traffic on the ground won’t get any less congested: AAA projects that a record 38.4 million people will take road trips over the long weekend.

High inflation for more than three years has affected American budgets and, especially, their mindsets. But while people may feel pinched, some are still willing to spend — if not splurge — on travel and leisure.

“The truth is that even though people complain about the economy and complain about inflation, overall, households are doing very well in the United States,” Gus Faucher, chief economist of PNC Financial Services, told CNN on Friday.

Inflation has slowed in recent years, declining 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, the CPI measured 2.3% annually. Price increases continue to hit, especially where consumers feel it most (their shelter, food and transportation). However, the job market is historically strong and earnings are outpacing inflation.

“People see [high gas] prices, and they feel like they’re not keeping up,” Faucher said. “But the fact is, they are. We see that clearly in total consumer spending.”

Take a flight to Taylor, buy a ticket for Mickey
Consumer spending has risen for 12 consecutive months, Commerce Department data shows. And the impact of the pandemic is still profound: Americans are putting their cash, and their credit, toward experiences.

Disney parks and experiences revenue increased about 11% in the second quarter from a year earlier. The company said that while attendance was not at the high levels seen following the end of the Covid pandemic restrictions, it was still increasing at the US Disneyland resort and Hong Kong.

But it’s not just Disney – consumer appetite for travel remains robust and is expected to increase as summer begins.

“Demand continues to be strong, and we’re seeing record spring and summer travel seasons,” Delta Air Lines CEO Ed Bastian said on a call with analysts last month. “Delta’s core customers are in a healthy position and travel remains a top purchasing priority.”

United Airlines also said in April that it expects both airlines and the industry as a whole to report record passenger numbers during the summer.

Credit some of that to Ms. Swift: United and Delta said this week that demand is growing for Taylor Swift’s “Eras Tour” destinations in Europe.

And there’s some good news on inflation in that regard: Airline fares fell in April from March and were actually down a little more than 1% from February 2020, CPI data showed.

Expenses by land and sea
Cruise transactions, including 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 Economic Institute report.

The surge in cruise spending may be due to “sustained price increases in the hospitality industry,” the Mastercard report said. That makes cruising “a more budget-friendly option in many cases.”

Still, many big hotel chains say they don’t see a significant recall.

For example, Marriott International raised its full-year earnings guidance in its first-quarter results reported on May 1. The company saw its global revenue per available room increase 4.2% compared to the previous year.

“Our 2024 outlook still assumes continued strong travel demand and a continuation of current macroeconomic trends,” said Kathleen Oberg, chief financial officer at Marriott, during a call with analysts.

Boom times may not last much longer
However, nothing lasts forever.

Other major players in the travel industry have reported similar trends this earnings season. Americans, especially lower-income consumers, have scaled back spending at retailers as commodity inflation outpaces wage growth. In fact, they have been frugal with some experience-based expenses such as eating out, instead choosing to eat at home.

Still, some executives have warned that the appetite for travel has not matched the boom seen immediately after Covid-19 restrictions were lifted, and that the boost from that period is fading.

Another potential source of problems is the uncertain economic environment. Pandemic-era savings have been spent while sticky inflation and high inflation rates eat away at 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 slower-than-expected growth in gross bookings in the first quarter.

“We see a healthy but more normalized market environment for travel around the world,” CEO Peter Kern told analysts earlier this month. “We are largely past the pandemic-driven recovery.”

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