Consumers are HOT to say goodbye to the Covid-19 pandemic and hit the road, skies, and waterways this summer. With demand high, consumers are the ones footing the bill from sky-high gasoline prices to lodging bills that will make you do a double take.
With these things on the rise, it is essential to understand the broader impacts of a busy travel season and what this may mean for the rest of 2022.
Pack your bags and hit the road, let's go:
● Here is what to expect: It's going to be busy. The U.S Travel Association expects Americans to spend $95 billion on travel, down only 5% from 2019. This is going to be a significant boom after the lack of travel during the pandemic. Planning is going to come in handy if you are envisioning your dream vacation and want to get the best deals. People are planning trips even further in advance to get exactly what they are looking for.
Most Americans, about 6 in 10, are taking at least one summer trip. According to Forbes, of those planning vacations, despite the struggles with higher gas prices and inflation, 35% expect to travel more this summer than last.[1] Experts are also predicting that with the staffing shortages, there will be less service wherever you go and continued supply chain issues. Above all, don’t forget to lower your expectations and expect delays and cancellations no matter where your destination is. Do not be surprised if you must get creative or be more independent when traveling in this hectic summer.
● While for some, inflation may create pause: With inflation now one of the top financial concerns for many Americans, especially among LGBTQ+ and BIPOC communities, summer plans will certainly shift according to the Consumer Spending & Saving Index from Massachusetts Mutual Life Insurance Company. People will be paying a lot more and receiving a lot less. On average, Americans plan to spend about $2,240 each month this summer. Of those that believe their spending will increase from last summer, the most common categories of new spending are gas (57%) and vacations (36%).[2] However, there are a large majority of people who believe that this inflation will cause them to decrease their spending. These people plan on decreasing their spending on eating out (85%), travel (66%), and new clothes (64%).
This means that there are two groups emerging; those who want to travel and spend more on experiences again after the pandemic, and those who want to conserve their money due to inflation. Inflation has proved to weigh heavy even for parents in determining whether to send their kids to camp this summer, with 68% of respondents indicating it impacted their decision. As a result, inflation has put a damper on many people’s summer plans.
● Gen Z leads in travel spend and ambitions: Younger consumers are ready to get out there! Gen-Zers anticipate spending big on travel this year – more than any other generation despite their young age. 72% claim they plan to spend more, or the same, in 2022 than in pre-COVID-19 times.[3] That 72% also claim they will be willing to splurge on a huge trip this year. The top three reasons for this splurge include wanting to see friends and family, visiting new U.S. cities, and for a mental health boost.
While budgeting still seems to be a priority for this generation, the freedom that has come after the pandemic has made them want to go out and check things off their bucket list while they can. Gen-Zers want to spend on leisure and things they have been wanting to do more than ever before. They understand that there may always be uncertainty in the world now and so it is best to do what you want now without worrying so much about the payments. However, their travel plans are more focused on exploring the U.S, as the war on Ukraine and other global issues have proven to be off-putting for international travel.
Understanding the Big Picture for Spending in 2022:
Consumers are still spending at a healthy pace as we enter the second half of 2022, but the big question is, how long will this last? With inflation lingering and long lasting and for some consumers that have those summer vacations right around the corner the big question then becomes, when will we feel the squeeze?
Inflation is now at a 40-year high and growing. Economists aren't seeing a downward trend coming anytime soon, and so this issue will likely become more alarming for a growing number of people in the near future. However, signs of a recession do not look likely this year as the spending is continuing, and the job market is still booming. The only likely cause of one would be from the Fed to help curb inflation. Fed Chair Jerome Powell stated that he will do what is necessary, even raising interest rates to help taper down the economy and trigger a recession.[4] However, experts believe this will likely not happen until it is necessary, possibly the second half of 2023. Signs of a recession only are present with spiked unemployment rates and job losses, and right now we are not at that point. Therefore, spending will likely keep increasing the rest of this summer of travel, but possibly towards the end of this year, people will start to spend less and less as inflation continues to go up.
Value in Addressing the Big Picture:
There is immense value in understanding and addressing the big picture and how the macro factors affect businesses and how this eventually impacts consumers. At empatiX we understand that our clients’ do not exist in a silo and it's imperative to keep our eyes and ears open to what happens in the world around us. We stay curious and design insights endeavors that look at the whole picture help to ignite our work and drive actionability for the clients we work with.
[1] Elliott, Christopher. “Here's What to Expect from the 2022 Summer Travel Season.” Forbes, Forbes Magazine, 23 May 2022, https://www.forbes.com/sites/christopherelliott/2022/05/21/heres-what-to-expect-from-the-2022-summer-travel-season/?sh=3a52d1062bf1.
[2] 2022 MassMutual Spending & Saving Quarterly Index. June 2022, https://www.massmutual.com/global/media/shared/doc/massmutualconsumerindexjune2022.pdf.
[3] Avail Car Sharing. “The State of Travel in 2022 - A Survey of American Generations: Avail Car Sharing.” The State of Travel in 2022 - A Survey of American Generations | Avail Car Sharing, Avail Car Sharing, 29 Mar. 2022, https://availcarsharing.com/resources/sharing-state-of-travel-survey.
[4] Rugaber, Christopher. “Explainer: Just How High Is the Risk of Another Recession?” The Washington Post, WP Company, 15 June 2022, https://www.washingtonpost.com/business/explainer-recession-fears-grow-just-how-high-is-the-risk/2022/06/14/38691706-ec07-11ec-9f90-79df1fb28296_story.html.