Research

Who’s Driving Travel Spending?

According to the July newsletter from Tourism Economics, inflation cooled in June, with the Consumer Price Index falling 0.4% month-over-month largely due to lower gasoline prices, pulling year-over-year inflation down to 3.5% from 4.2%. Real (inflation-adjusted) wage growth is expected to turn positive for the first time since February, which should support consumer spending. However, risks remain; oil prices have risen following renewed US-Iran hostilities, and AI-driven memory chip shortages are beginning to push up electronics costs.

The more significant trend is the widening divide in household finances. Higher-income consumers, buoyed by strong Q1 stock market gains, continue to drive discretionary and high-end spending, while lower- and middle-income households face depleted savings, rising delinquencies, and tighter lending standards. This matters for operators because consumer spending is increasingly dependent on higher-income travelers; any pullback in equity markets could pose downside risk to the broader spending outlook. Separately, the Federal Reserve's anticipated rate cut has been pushed back to Q3 2027, meaning financing conditions are unlikely to ease in the near term.

As we have seen locally, U.S. hotel demand has grown every month this year, with the U.S. Average in June tracking at around 2% growth. At the same time, TSA airport checkpoint volume turned negative in May and June, suggesting some travelers may be substituting road trips for air travel in response to price pressures — a signal that shorter, closer-to-home trips may be gaining share.

Lee en español