Over the past week we’ve covered a slew of recessionary indicators and continue this discussion today with a focus on discretionary spending. We decided to check in on the US consumer through the lens of summer trips given that it’s vacation season and getaways are typically axed at the first sign of financial trouble. Allianz Global Assistance’s 11th annual Vacation Confidence Index out late last month shows a mixed picture:
- On the plus side, Americans planned to spend a record amount on their summer vacations this year. Allianz estimated the total spend would exceed $100 billion for a third straight year, coming in at $101.7 billion. That’s up +1.3% y/y after edging down 0.7% y/y in 2018.
The average spend was also estimated to cross the $2,000 threshold for the first time since the survey started tracking it in 2010, up 5.2% y/y.
- On the flip side, just 42% of Americans said they were confident they would take a summer vacation this year, almost near the low of 40% in 2013. Over half (52%) blamed financial reasons for not being confident, while over a third (38%) said they couldn’t because of time constraints including either not being able to take time off from work or not wanting to do so.
By contrast, nearly half (49%) of respondents said they usually take an annual summer vacation, up three percentage points from 2018. The most likely demographics to typically go on a summer vacation included Gen X’ers (aged 35 to 54), high income earners (+$100k), and “those who think a vacation is important”.
Also, over half (51%) of Americans said they took their last vacation over a year ago and just two in ten (21%) Americans have gone on a vacation in the past three months.
Despite the current economic cycle being long in the tooth, American vacation time has not recovered to levels prior to the financial crisis. For example:
- The U.S. Travel Association’s latest State of American Vacation report showed over half (52%) of American employees had unused vacation days at the end of 2017. That was down from 54% in 2016 and 55% in 2015.
Those who did not use all their vacation time accumulated 705 million unused days in 2017, even as they earned just over a half a day off more than the prior year. Those days that “go unused represent a $255 billion opportunity that the American economy is not capturing,” according to the report.
- The national average is 17.2 vacation days taken per employee. Although that’s better than the low of 16.0 days in 2014, it still hasn’t caught up (at least as of 2017) to the long-term average of 20.3 days from 1978 to 2000.
- Moreover, a recent survey by LinkedIn shows workers remain consumed with work even while on vacation. Almost 60% of respondents “said they engaged in work duties while taking time off, amid mounting pressure to always be on the job.” Likewise, 59% of workers said they checked in with their bosses or coworkers at least once a day while vacationing. Almost a quarter (23%) also said they “actively engaged with work more than three times per day while on vacation.”
A trip to Google Trends – which measures how often a term or phrase is entered in its search engine – confirms these findings. Searches for “Vacation” since 2004 show interest usually peaks in June/July each year, but those highs have trended lower nearly ever year. Searches for “Staycation” reach their highest level over the summer as well, but these peaks have trended higher every year since the financial crisis and are currently at a record high.
Bottom line, the good news is that vacation spending is still strengthening to record levels rather than slowing down. This enables us to add yet one more recessionary indicator to our list of showing few signs of concern. That said, the pressures of work keeping over half of Americans from going on vacation aren’t allowing workers to stimulate the economy to their fullest potential despite record levels of spending on getaways. At least the rising popularity of “Staycations” are helping pick up the slack, as it allows workers to be more flexible with shorter and local activities, while remaining available to work.
Ultimately, this dynamic is a function of both American culture and a strong economy. People are happy to splurge when they can take time off work to go on a vacation, but a robust economy and low levels of unemployment pressure Americans to work more and play less.