Skift Take

There are innumerable factors that impact the health of the travel industry but the latest U.S. government numbers on retail spending lead to the conclusion that consumer spending habits are changing. There is a shift in emphasis from purchasing consumer goods toward buying services such as travel. That's a classic tailwind and a very healthy trend indeed for the gamut of leisure-travel businesses.

There is a broad shift under way in U.S. consumer spending that could have very positive implications for the travel industry if the trend persists.

Analyzing the federal government’s July 2016 numbers on retail sales, the Wall Street Journal pointed Saturday to a “seismic shift in consumer spending.”

“Americans are still splashing out, but they are splurging less on goods such as apparel and electronics and more on entertainment, travel and health care,” the Wall Street Journal states.

While the government’s numbers showed that overall retail sales, including at department store chains, electronics stores, auto detailers and online retailers, in July were flat at $457.7 billion, First Data Corp. reported separately that travel sales in July increased 8.6 percent compared with July 2015. First Data Corp. monitors sales at 4 million outlets across the country.

Under the headline, “Summer Travel Boosted Consumer Spending Growth in July to 2.9%,” First Data’s July report on consumer spending states: “Travel grew at 8.6%, the highest growth of the last 12 months for the industry. The hotel industry continued its strong summer performance, with 4.6% growth compared to 4.3% in June.”

Consumer spending, spurred by lower gasoline prices, job growth and increased wages have nudged the economy along so far this year, according to the Wall Street Journal.

The boost in U.S. domestic leisure travel sales in July comes despite reports from airline and hotel executives, as well as distribution officials, about softness in business travel demand globally.

But uncertainty about security and other factors in Europe may have played a role in the increase in leisure travel sales in the U.S. in July.

During Expedia Inc.’s second quarter earnings call on July 28, CEO Dara Khosrowshahi spoke about U.S. travelers’ changed vacation plans.

“[The] mix absolutely changes,” Khosrowshahi said. “But usually the person who wants to go on a summer vacation goes on a summer vacation. If there’s a general trend that I’d say is that usually when you see periods of uncertainty you see people staying closer to home. So, as opposed to going on that long trip or Americans going to Europe, they will take their summer vacation in the States, if there’s any pattern to that.”

U.S. consumers’ penchant to shift their spending from TVs and cars toward services, including travel services, is a long-term trend although it may be picking up steam.

“Since 2000, there has been a significant rotation in U.S. spending away from goods and toward services,” according to the Wall Street Journal story.

That “seismic shift,” as punctuated in the July retail sales numbers and overall trends, could be very beneficial  to the travel industry, whether they conduct business offline or online.

In other words, it’s a classic tailwind to be taken advantage of.


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Tags: airlines, business travel, expedia, hotels, leisure travel

Photo credit: U.S. consumers are tilting their spending away from consumer goods toward services, such as those for travel. Expedia believes U.S. travelers will take vacations regardless if they choose to travel domestically or abroad. Expedia

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