US Leisure Travel: A Slow Liftoff

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US Leisure Travel: A Slow Liftoff

Most US airline stocks have struggled to break out past their mid-March post pandemic highs despite the domestic economy continuing to reopen. What’s going on here, and what does it say about the real state of the US consumer?

Let’s start by looking at trends in airline ticket prices, which is how we measure incremental real-time consumer demand and eventual profitability for the airlines. There’s little human decision-making bias in these figures given that computer algorithms set these costs based on demand to maximize load factors and total revenues.

Here is a comparison of the cost of a non-stop, round-trip flight from New York to Orlando during popular times to fly over the balance of this year. We’ve also included comps to our last look a month ago and 3 weeks before that (using Wednesday to Wednesday timeframes to make the data comparable):

  • 4th of July week (6/30 – 7/7): now $152, down 21 pct from $193 a month ago after being up 69 pct from $114 three weeks prior.
  • Labor Day week (9/1 – 9/8): now $135, down 18 pct from $165 a month ago after being up 22 pct from $135 three weeks prior.
  • Thanksgiving week (11/24 – 12/1): now $336, down 15 pct from $395 after being up 61 pct from $245 three weeks prior.
  • Christmas week (12/22 – 12/29): now $244, down 10 pct from $272 after being up 17 pct from $232 three weeks prior.

Takeaway: US airlines have given up some pricing for major holiday weekends over the balance of this year. The question is why…

Given that most people, especially families, travel to Orlando to visit Disney, we looked at park availability over the coming months. With capacity limits in place, there’s no reason to fly to Orlando if you can’t actually go its premier attractions, which may explain the weaker airline pricing power on that route. Here’s what we found:

  • Tickets for all parks are unavailable from May 1st through the 18th. There’s still some availability Memorial Day weekend, such as for Epcot and Disney’s Animal Kingdom, but not for the other two parks, Magic Kingdom and Disney’s Hollywood Studios.
  • Tickets only become available for all parks starting the second week of July.

Takeaway: the New York to Orlando ticket prices we’ve been tracking fall over times when Disney World parks have full availability, with the exception of 4th of July weekend which is a little spottier. Disney World may be sold out in the near-term, but those wanting to visit over the Summer or Holidays can still secure tickets in addition to booking a flight.

But … what if Americans just don’t want to go to Disney World this summer? A sacrilegious thought, but worth checking with Google Trends data. Sure enough, query volumes are still at the lower end of their 5-year range. Additionally, the majority of states with heavy Google search interest in “Disney World” are in the South and within driving distance, such as Florida, Louisiana, Alabama, South Carolina, Mississippi and Georgia. More on this in a minute …

Now let’s move on to another way of assessing air travel demand: Google Trends query volumes for “Jetblue” (blue line), “Southwest Airlines” (red line), “United Airlines” (yellow line), “American Airlines” (green line) and travel booking site “Expedia” (purple line) since January 2019:

  • Searches for “American Airlines” and “United Airlines” are still not back to even their 2019 lows.
  • Queries for “Jetblue”, “Expedia” and “Southwest Airlines” are at the lower bands of their 2019 levels.
  • Searches for all these airlines picked up noticeably from January through early March but have mostly stalled out since.

Takeaway: US consumer demand for air travel is still very, very far from 2019 levels.

So where is the pent-up demand for flying and travel that many anticipated with more vaccinations and warmer weather? A few closing points:

#1: We’re missing European tourism, and that’s clearly hurting pricing. European travel to the US remains very limited, reducing a meaningful part of traditional Summer demand for US airlines and attractions like Disney World. It would be one thing if there were enough domestic demand to help offset slack international inbound tourism. Recent data is not especially encouraging between constrained plane ticket pricing power and airline searches that are only slowly grinding their way higher.

#2: Other work we’ve recently highlighted shows many Americans plan on socializing and staying closer to home this Summer. For example, Google searches for outdoor furniture and other home improvement items are making new 5-year highs even after huge demand last year. Americans have also grown accustomed to backyard barbeques or short-distanced driving trips over the last year. It’s telling that the top states searching for Disney are nearby… And unlike US Google searches for the airlines, those for “Airbnb” already match the high in 2019 with seasonal strength still to come. A car trip and Airbnb stay are still more controllable and comfortable environments.

#3: The marginal family or consumer may be waiting until safety protocols/business restrictions ease up for a more enjoyable flying and destination experience. For example, does a family with young kids want to hassle with masks and other safety requirements on the plane and all day at hot theme parks this Summer? Or do they wait a year until it all clears up? Even with lots of savings throughout the pandemic, it’s still a very expensive trip that should generate mostly positive memories.

Bottom line: the pandemic created new consumer behaviors, and it will take time to unwind them. Of course, this data should improve as the Summer draws closer. But what we’ve shown you today explains the price action of airlines over the last few weeks. No doubt the desire to travel will return more forcefully as Americans eventually spend some of their savings, but it may happen later than many had expected. A return of European travelers will also help, but that’s likely a 2022 story. We’re sticking with our positive view of the airline sector – they’ve held in despite the slow demand ramp – and still believe they’ll work their way higher as load factors and pricing improve.