Travel and Leisure’s Loss is Retail’s Gain

By admin_45 in Blog Travel and Leisure’s Loss is Retail’s Gain

The US travel and leisure industry are in for a tough Holiday 2020 as virus cases rise and Americans stay closer to home as a result. The American Automobile Association (AAA) is out with their latest annual forecasts for Thanksgiving this year; here’s what they expect:

Overall travel: a 9.7 pct y/y fall to 50.6 million travelers for Thanksgiving 2020, 5.5 million fewer than 2019 and the largest one-year decline since the Great Recession in 2008. This “ends an 11-year streak of rising travel volume from 2009-2019.”
Auto travel: a drop of 4.3 pct to 47.8 million people, but is “the only mode of transportation to see share growth for the holiday with nearly 95 pct of all trips happening by car (compared to 89 pct in 2019).”
Air travel: a decrease by almost half, with 2.4 million Americans potentially flying for Thanksgiving versus 4.6 million in 2019. The “share of travel will fall dramatically, from 8 pct to 4.7 pct.”

The upshot: AAA expects those traveling for the holiday to “drive shorter distances and reduce the number of days they are away”, but also notes that the actual number of people traveling will likely come in below their forecasts amid increasing virus cases and renewed restrictions. On the downside, the travel, leisure and hospitality industries will continue to suffer as it will be more difficult to leverage a traditionally important season of the year for incremental sales after an already challenging 2020. But that comes as no surprise. On the plus side, savings on gas, air travel, hotels and other vacation expenses strengthens household balance sheets at the margin and potentially increases spending heading into the holidays.

We have a few examples of Google Trends search volumes to show how this dynamic is playing out in some important categories for retailers. Money not spent on flights can go towards new gaming consoles or pieces of furniture, after all.

#1: Google Trends search volumes for “Walmart” and “Target”

Searches for “Walmart” and “Target” are up 60 pct and 84 pct respectively since the first week of November. They had been slowly declining since the spike in interest after lockdowns in March when people started stocking up for quarantines.
Queries for both retailers usually spike around Black Friday and Christmas each year.
Most telling, searches for “Walmart” and “Target” are currently 43 pct and 52 pct higher respectively than the comparable week in 2019.

Takeaway: we continue to highlight how a slew of retailers have launched Holiday sales earlier than usual to spread them out more over the season this year amid an uncertain virus trajectory, renewed restrictions and greater presence of online shopping. Given the notably higher interest in major retailers - such as Walmart and Target - versus this time last year, that strategy is clearly working. How much this pulls sales forward from December remains to be seen, but this is just one more chart that shows November retail sales should come in reasonably strong.

#2: “Best Buy” and “GameStop”

Searches for “Best Buy” and “GameStop” usually peak around Black Friday and spike again (albeit lower) around Christmas each year.
Queries for “Best Buy” and “GameStop” are already 46 pct and 67 pct higher respectively than the comparable week last year.

Takeaway: electronics and gaming have seen outsized demand over the pandemic but seem to still have more room to run this holiday season. For example, searches for “laptop” usually peak over Black Friday every year, but did so uncharacteristically in March after lockdowns this year. That was followed by another spike nearly as large in August before back to school, and more upticks since late October amid new deals. The release of the new Apple MacBook offerings has also helped.

Likewise, searches for “Playstation” and “Xbox” reached 5-year highs this month amid the releases of the PS 5 and Xbox Series X and S. Bottom line: a combination of highly anticipated releases (i.e. gaming consoles and laptops) and holiday discounts are enabling the latest massive tech upgrade cycle to continue, clearly helping drive interest in related retailers such as Best Buy and GameStop.

#3: “Sofa”, “coffee table” and “rug”

Searches for “sofa” and “coffee table” first rose to 5-year peaks in May and remained at relatively high levels throughout the summer. After falling in September/October they are on trend to reach a new 5-year high, up 17 pct (sofa) and 41 pct (coffee table) from their peaks in May.
Queries for “rug” also peaked in May 2020 and are now solidly at a new 5-year high, up 14 pct from the May high point.

Takeaway: Americans are also continuing their 2020’s home upgrade cycle amid a hot housing market and people wanting to update their décor with the extra time they’re spending at home.

#4: “Jewelry”

Searches for “jewelry” understandably collapsed after lockdowns amid economic uncertainty.
Queries now best pre-pandemic levels and are currently 17 pct higher than the comparable week last year.

Takeaway: interest in jewelry has recovered and should continue to capture attention into December as that’s when it usually peaks for the year likely due to late holiday gift shopping.

Bottom line: 2020 will be a weak holiday travel season, but that money will likely be reallocated to other product categories faring well during the pandemic (i.e. electronics and the home) or even those that have struggled (i.e. jewelry). If there’s any silver lining, it’s that losses for the travel, leisure and hospitality industries will likely turn into gains for retailers over the balance of this year. Yes, we’re still concerned about high unemployment, no incremental fiscal stimulus and an increasing virus case count. But the data we’ve shown you today provides an important countervailing signal; consumers, if they have the money, are spending it.

Source: https://newsroom.aaa.com/2020/11/fewer-americans-traveling-this-thanksgiving-amid-pandemic/