More Americans Traveling
AAA today released a report about travel over the upcoming Fourth Of July weekend. They are projecting that 41 million Americans (a 1.9% increase over last year) will travel more than 50 miles from home during the weekend. More than 80% or about 34.8 million will travel by automobile alone.
Increased Debt
AAA makes an interesting assertion in the report. They assert that the increase in travel is not related to an increase in income, but rather to an increased willingness to take on credit card debt. This doesn’t surprise me, but in some way I am a little disappointed.
Here is a quote from the report: “An increase in consumer spending is primarily due to increasing credit, rather than rising incomes. Consumers have been hesitant to add to their credit card balances the past several years, but continued improvements in the employment picture and rising home values means they are starting to feel more comfortable taking on debt.”
When I talk to people about my travels and how it often doesn’t cost me anything, they wonder how it is possible. Sometimes they even think I am doing something shady or dishonest. The truth is that my fellow Americans and their massive amounts of debt ensure the banks make a lot of money. People like me who have no debt are the exception and not the rule. We can take the bonuses and not pay interest, because the banks are making a killing on everyone else.
Some Prices Are Higher As Well
AAA also makes note that hotel prices have increased significantly from a year ago. Rates are up 15% at 2 diamond hotels and 9% at 3 diamond hotels. For example, a year ago the average 3 diamond property was going for $164 per night. This year it is expected to go for $178 per night. Gas prices are at their highest level for this weekend in the past six years as well.
The AAA report mentions that airfares are actually down 5% from last year, but a USA Today article cites the Bereau of Labor Statistics in saying that airfares have increased 6% from April to May alone which is the biggest single month increased in 15 years.
What This Means For Us
For people who love to travel for free with miles & points this isn’t the best news. As consumers gain confidence and begin to spend and travel more, the loyalty programs will have less incentive to run promotions. In the hotel space, the cost of free rooms is likely to go up as the reimbursement costs that the hotel programs pay will increase as well.
As far as airline programs go, we have already seen a huge shift towards revenue based earning which significantly decreases the amount of miles earned for most people. This fact combined with the consolidation of the airlines and the recent increases in the amount of miles needed for award redemption at airlines like Southwest, Delta & United means the outlook isn’t exactly rosy in my opinion.
The one shimmer of hope (I guess) is that the banks may use this increased willingness to take on debt to up their bonus offers in order to entice consumers into taking their high interest rewards cards. At least readers of this blog won’t fall into that interest trap.
Conclusion
I highly suggest taking a couple of minutes to read the full report if you are interested in the travel industry. While ultimately this “report” is just a way for AAA to sell their memberships and services, it definitely contains some useful and interesting information.
What do you think? Do you take on debt to travel? Do you have family or friends who do? What does this mean for us? Let me know what you think in the comments!
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Good post Shawn. I would not have made the connection between increased consumer debt and a lack of incentive for CC companies to offer bonuses. Maybe there will be an upside in that CC companies will offer increased opportunities for MS in hopes that people take on more debt in the process.