How concerning is the bear market's negative effect on the hospitality and tourism industry?

 

By mid-June, the U.S. stocks had fallen 22%, and bonds were down 11% from the beginning of 2022 (Zweig, 2022). Stocks officially entered the bear market territory. On top of that, the Federal Reserve raised interest rates by 0.75 percentage points in June, with the inflation rate around 9%. Nothing is encouraging people to spend more on “unnecessary” leisure activities. 

 

Consumer sentiment is low

 

U.S. consumer sentiment plunged to 50.2 from 58.4 in May (Golle, 2022). Such a record-low sentiment also comes with 40-year high inflation at 8.6%. Compared to the 46% of respondents who attributed their negative views to persistent price pressures, only 13% expected their incomes would rise more than inflation, which was also the lowest share in almost a decade. 

 

Regarding leisure activities, travel conversations on Twitter decreased 75% from April to May (Pitrelli, 2022). Meanwhile, half of the discussions about gas prices and travel were negative.

 

Are people canceling trips?

 

According to a recent TripAdvisor Travel Index, 77% of respondents indicated that they were either “extremely” or “very” concerned about rising costs. Marriott, for example, recorded a 25% increase in revenue per available room in 2022 from its 2019 level during the Memorial Day weekend (Thomas, 2022). The hotel chain’s luxury portfolio also saw a 30% increase in rates in the first quarter of 2022 from its 2019 level. 

 

Still, nearly 40% more people plan to travel this summer than in 2021, according to the same TripAdvisor Travel Index. In another survey conducted by The Vacationer, 55% of participants said they would travel for the 4^th of July holiday, an 8% increase from 2021. 

 

Are people changing their travel plans? 

 

While people are not canceling their travel plans entirely, some might have adjusted their travel budgets. According to Zeta Global, 74% of Americans are now actively searching for ways to save on travel. About 25% suggest that they were seeking out cheaper transportation, hotels, or vacation destinations. Additionally, interest in “educational” travel to museums and national parks is down by over 50%, although the demand for “pampering” travel (e.g., spas) is still on the rise. 

 

A Cal Poly Pomona alum told me that he had recently observed more cancelations in his hotel, which is very close to Disneyland. It is plausible that people are finding cheaper alternatives for their Disney vacation. 

 

It is unfortunate that people usually cut their expenses on travel and leisure activities first when they feel uncertain about the economic outlook. How concerned are you about the bear market’s negative impact on the hospitality and tourism industry?  

 

References

 

Golle V. (2022, June 10). U.S. consumer sentiment slumps to record low on rapid inflation. Bloomberg. Available on https://www.bloomberg.com/news/articles/2022-06-10/us-consumer-sentiment-slumps-to-record-low-on-inflation-woes.

 

Pitrelli, M.B. (2022, June 15). Travelers are upset about rising costs, but most aren’t canceling their plans just yet. CNBC News. Available on https://www.cnbc.com/2022/06/15/travel-costs-are-up-but-travelers-arent-canceling-their-plans-yet-.html. 

 

Thomas, I. (2022, June 11). Why Marriott, Hilton and Hyatt say hotel prices are only going up. CNBC News. Available on https://www.cnbc.com/2022/06/11/why-marriott-hilton-and-hyatt-say-hotel-prices-are-only-going-up.html

 

Zweig, J. (2022, June 17). How to stand up to a bear market. The Wall Street Journal. Available on https://www.wsj.com/articles/how-to-stand-up-to-a-bear-market-11655477101.

Note: This article was first published in the Hospitality News Magazine; The picture was downloaded from The Wall Street Journal.