Consumers Reining in Travel, Entertainment Spending
Consumers splurged when the pandemic ended but that trend doesn't look like it has legs.
For a little while there, consumers were opening their wallets and catching up on travel and luxury entertainment. Some called it "revenge spending," making up for trips not taken during the pandemic.
Maybe so, but the times appear to be changing (again). A Bloomberg survey finds that even wealthy travelers are tightening their purse strings, with most saying that $500 a night is all they're willing to pay for a hotel room.
Are consumers fearful of a slowing economy? Or are they rebelling against what many see as higher prices without an increase in service quality? Whatever the reason, restaurants and airlines are feeling the pinch as well, and some may need to rethink their pricing strategies.
According to Bloomberg, Lufthansa and some other carriers have kept capacity tight, hoping that limited seats will translate into travelers being willing to spend a little bit more. That tactic may backfire as consumers watch the stock market fluctuations, bank failures, growing layoffs in high tech and continued inflation boosting the price of essentials and luxuries in all categories.
Home rentals continue to boom
Airbnb, on the other hand, is continuing its recovery from the pandemic, recording its first profitable year in 2022 and shifting its focus to improving the core product for its millions of existing guests and hosts.
It may be that consumers see Airbnb and other home-sharing companies as more economical than traditional hotels, which cut back housekeeping and other guest services during the pandemic and don't appear to be in a hurry to bring them back, despite rising room rates.
The company said it has been working to add more supply. At the end of last year, it had 6.6 million listings, up 900,000 from a year earlier. It has also tried to make it easier for new hosts to get started, pairing them with experienced hosts for their first few bookings.
Car rentals, which went virtually extinct during the pandemic, are also returning and may be bucking the trend towards less luxurious options. Sixt, which rents German sedans including Audi and Mercedes-Benz, is expanding into new markets, including Washington Reagan National, where it is displacing Avis and Budget.
News Desk
Travel now, pay now
Whatever mode of travel and entertainment you use, you still need to pay for it. There are endless credit cards to choose from and lots of people offering advice on which is best.
One thing's certain though: the best way to finance a vacation or luxury splurge is to pay for it as quickly as possible. Ideally, that means you put it on your credit card and pay it off in full when the monthly bill shows up.
While travel can be relaxing, educational and enjoyable, it's nearly always expensive, with the average consumer spending $1,919 for a week away from home, according to the Bureau of Labor Statistics.
A compromise between paying everything off in 30 days and financing it longterm is to spread out airline costs for a few months. Most credit cards offer an easy way to do this. Some, like American Express, offer a fixed-fee for spreading out payments, thus holdng down overall finance costs.
Obviously, the best solution is to minimize expenses and use accumulated savings to avoid running up a big debt that will tie you down for the next year. Luxury travel's OK but, really, is it worth hundreds of extra dollars to stay at the Four Seasons instead of an Airbnb a few blocks away?
And as for first-class air travel, except on very profitable routes, it has been afflicted by the same cutbacks as the seats in back.
The biggest bargain in travel is the same as always – national parks. They offer million-dollar views for peanuts and most provide camping facilities on-site with affordable hotels usually located nearby. Times Square is fine but the Grand Tetons are quieter and less crowded.