Summer Travel Underscores a Still-Slow Recovery

by Alyssa Oursler | May 28, 2013 11:52 am

Memorial Day weekend has come and gone, with little sign of any post-holiday blues so far.

Instead, the markets are continuing their climb, as all major indices are up over 1% already today. That rally was helped by more solid news on the housing front: March home prices posted their biggest annual gain in seven years[1].

Still, the booming housing and stock markets — along with their subsequent and oft-cited wealth effects — seem to overshadow what is a very different story for lots of everyday American.

Namely, that we’re in the middle of what remains a slow-and-steady climb out of the recession’s pit.

The latest evidence of this reality? Summer travel plans.

The Associated Press described[2] this dichotomy the best, pointing out that “high rollers are flying to lavish hot spots for their vacations.” The number of people buying more expensive international tickets is expected to climb 2.6% in the next few months, according to Airlines for America, while luxury hotels are filling nearly three-quarters of their rooms on average — higher than their pre-recession peak.

All in all, “Those with higher incomes never stopped traveling, but thanks to new highs in the stock market they now feel secure enough to take longer vacations,” AP said.

But that’s just a sliver of the story. Even this past long weekend came with a cloudy travel forecast[3]. AAA expected an overall decline in Memorial Day travel as more folks traveled by car — avoiding high-priced air travel to the tune of an 8% year-over-year decline. As a result, median spending for the holiday was slated to fall 6%.

Why should you care? Well, a few common culprits were to blame for those numbers … and they aren’t going away anytime soon. Yes, the payroll tax, a 30-year low of working-age people in the workforce and what many see as an up-and-down economy are still taking their toll.

In fact, over 75% of Americans plan on taking a summer vacation, according to Orbitz[4], but only a quarter plan to spend over $2,500. Plus, while luxury hotels are booking fast, budget hotels are still below their 10-year occupancy average and more than 3 percentage points below their peak.

It might be tempting to assume that folks are upgrading from budget-priced locations, but data instead suggest that many travelers are finding even cheaper alternatives … or, worse, not getting a vacation at all.

As The Atlantic recently reported[5], the fact that “many low-wage employers, especially in retail, cut worker hours down just below the full-time mark in order to avoid paying out benefits” means that many Americans may not have days to take off for a vacation. Only 40% of part-time workers get paid vacation, and only 35% get paid holidays.

Plus, paid leave aside, those workers may not have the funds anyway. As InvestorPlace Editor Jeff Reeves recently noted[6], we are still saddled with persistently high unemployment and a lack of growth in skilled, well-paying jobs. He wrote:

In 2012, the job growth rate for restaurants hit a 17-year high[7]. You think that’s because of booming consumer spending, or simply a massive influx of workers desperate for any kind of employment … even restaurant jobs at minimum wage or less if they are dependent on tips?

He posits that it’s the latter — likely part of the reason that even those who take the time and spend the money are being extra-economical about it.

Heck, El Monte RV — one of the country’s largest RV rental companies — says summer bookings from domestic customers are up 20% to 25% from last year. Hardly shocking considering such vacations eliminate the cost of a hotel and allow folks to save by cooking their own meals.

Reeves aptly summed it up by saying: “There’s a reason why consumer spending remains weak and many investors are very leery about the state of the recovery.” Now, summer travel’s still-slow recovery is just more proof for the pile.

With that in mind, don’t put your blinders on as you cheer the market higher. For many, the recovery is still moving at a snail’s pace.

  1. biggest annual gain in seven years:
  2. The Associated Press described:
  3. cloudy travel forecast:
  4. according to Orbitz:
  5. As The Atlantic recently reported:
  6. Jeff Reeves recently noted:
  7. the job growth rate for restaurants hit a 17-year high:

Source URL:
Short URL: