Wells Fargo experts dish on summer travel trends
Americans are once again ready to hit the road as summer approaches. Wells Fargo experts share three trends for travelers to keep an eye on.
For the first time since early 2020, Americans are free to resume traveling with no COVID-related federal restrictions. And travelers are anticipated to take full advantage of that freedom.
In its 2023 summer travel survey, The Vacationer revealed that nearly 85% of all American adults intend to travel this summer — nearly 219 million people.
As travelers hit the road between Memorial Day and Labor Day, Wells Fargo economist Shannon Seery expects them to encounter a fiscal mixed bag.
“We are looking for inflation to slow, continuing to come off those multi-decade highs of the last year,” Seery said. “That gives consumers more spending power. However, prices of discretionary services — things like hotels and airfare — have increased rapidly because of pent-up demand and supply shortages.”
What else can travelers expect this season? Wells Fargo experts share three trends for vacationers to consider.
High prices aren’t stopping bookings
On average, Americans have significantly more cash at their disposal than at the onset of the COVID-19 pandemic in 2020.
Buttressed by six-to-10 months of excess savings, they are not just planning vacations — but often immersive, luxury-resort holidays for longer durations. And they’re doing this despite significant year-over-year increases in hotel and lodging prices.
“Travel has really become a priority for families and individuals. Whenever you take something away from people, they want it more, and COVID really did that. They are foregoing expenses in other areas so they can leverage the ability to travel.” — Scott Andrews, division executive, Wells Fargo Hospitality Finance and Gaming
“Travel has really become a priority for families and individuals,” said Scott Andrews, division executive, Wells Fargo Hospitality Finance and Gaming. “Whenever you take something away from people, they want it more, and COVID really did that. They are foregoing expenses in other areas so they can leverage the ability to travel.”
Watch Andrews discuss where the hotel industry stands today and why your next stay will likely cost more than your last one. (:41)
Expect cost of oil to be flat
Perhaps no commodity affects the day-to-day life of Americans more than oil. According to the U.S. Department of Transportation, in March 2023, Americans traveled 271.17 billion or 8.7 billion miles per day in motor vehicles.
Necessary to create gasoline and diesel — among other things — oil powers most of our cars, planes, trains, boats, and most anything with a motor. So, a small change to its price can have a miniature butterfly effect through the entire economy.
Take airplane ticket costs as an example.
Airlines have analysts who forecast the price of oil and set their budgets, plans, and ticket prices based on it and other factors. If there is a significant increase in the price of oil, the airlines will likely have to raise ticket prices to defray the added cost.
The United States is the world’s largest oil producer, accounting for about 16% of the global market, followed by Russia and Saudi Arabia, while the United States and China are the largest consumers.
“The reason oil prices are so volatile is because there are many different suppliers and many different buyers, and they’re not always supplying and buying at the same levels, at the same time,” said John LaForge, head of Real Asset Strategy for Wells Fargo Investment Institute. “That causes instability.”
LaForge and his team, however, don’t expect any significant oil increases — and therefore gas increases — in the coming months.
“Summer prices at the pump should be flat,” he said.
LaForge’s long-term forecast, however, is a bit more ominous. He expects oil prices to reach into the $80s per barrel by year’s end. Prices ranged from $66 to $83 over the last six months.
“We’re anticipating a mild recession, and economic growth is slowing globally and in the United States,” he said. “The lack of demand spurred by the mild recession should keep prices stable. Next summer, we expect the economy to be healthier, but oil will still be under-supplied globally. Summer 2024, that’s where our concern lies.”
Cruises are a ‘compelling’ value
Arguably no travel industry suffered more during the last three years than cruise lines. They were shut down for large swaths of time, stranding two million potential customers at their land-locked homes.
Traditionally, cruises have a lower price entry for consumers. And with the prices of flights and lodging increasing, they are being highlighted even more.
“There’s a healthy demand for cruises right now,” said Dan Politzer, director, senior equity research analyst, Gaming & Leisure at Wells Fargo. “They represent a compelling value proposition and stick out as an attractive deal for the more price-conscious consumers relative to other options.”
Since April 1, 2022, the U.S. dollar has vacillated near a one-to-one value with the euro,* offering travelers a chance to see Europe via cruise cheaper than any point in the last five years.
“Outbound trips to Europe are attractive and cost conscious right now,” Politzer said. “It’s an easy way to see multiple destinations without managing flights, hotels, and transportation.”
Watch Politzer explain why the cruise industry is in for a “pretty big” summer and fall. (:31)
*Source: Google Finance
