The Covid-19 pandemic drastically impacted people’s lifestyles, and significant consumer spending shifts accompanied those changes. Specifically, consumers prioritized their health and that of their families, which caused them to stay at home more and avoid social activities.
They also changed their spending habits in relation to travel, vacation, and shopping. According to one Deloitte survey conducted between April and May 2020, only 23% of respondents felt safe taking a flight, and 29% felt safe staying at a hotel. Between the first and second quarter of 2020, real spending dropped drastically on transportation services (36%), recreational services (46%), and accommodations (68%).
Now that the threat of Covid-19 has abated (to some degree) thanks to rising immunization rates, consumers are resuming some pre-Covid spending habits. Meanwhile, they are also maintaining some newer habits that arose as a result of pandemic lifestyle shifts. Let’s examine the rebound in travel and shopping spending in the second half of 2021, as well as the expected trends in these areas of consumer spending.
Service sectors are already seeing a rebound as people increase their travel, attend live sporting events, and shop. The spending on durable goods, though, looks as if it will be moderate. Consumers are more eager to get back to the activities they missed during lockdown than to purchase more things. Overall, spending in service industries will likely expand by 6.2% throughout 2021, with that momentum continuing into 2022.
The travel industry is experiencing a similar resurgence. Now that travel options are becoming available again, 44.6% of Americans feel this is a good time to spend on leisure travel. In summer alone, a big majority (77%) of Americans planned to travel for fun. Many of these are overnight trips, with the most popular accommodation types being friends’ or relatives’ houses, three- to four-star hotels, and budget hotels.
Travel agents have noticed this shift more than anyone. They are undergoing an unprecedented surge in business now that Covid-19 has drawn attention back to their profession. With all of the changing rules and restrictions surrounding travel, people want a person who they can go to for up-to-date advice and interpretations on travel rules and guidelines. Otherwise, it can be hard to keep track of the latest information in the media or on the internet: Is a vaccination enough to travel to a specific destination? Is a Covid-19 test still needed? How many days are needed between vaccinations and tests to get clearance?
Travel agents can help their customers answer these questions and give them the information needed to travel safely and confidently. That’s why demand for travel agents has heightened this year. In fact, 76% of travel advisors have seen an increase in customers in 2021, and 80% are hearing from travelers who have never worked with a travel agent before.
According to the National Retail Federation (NRF), retail sales will likely grow between 10.5% and 13.5% to more than $4.44 trillion in 2021 as the economy continues to quicken its post-pandemic recovery. The NRF also anticipates full-year GDP growth to about 7%, compared with the 4.4% forecast in early 2021.
Why the increase? With the current rate of consumer spending, the economy is opening much more quickly than experts originally thought.
Consumers are doing a large portion of spending on health- and wellness-related items. About 42% of people consider health a top priority, and consumers in every market, McKinsey researched said, they’ve prioritized wellness substantially more during the past two to three years. Because of this, the firm expects consumers to continue to purchase wellness products and services throughout the next year, especially in services that focus on the marriage of physical and mental health — such as personal training, nutritionists, and counseling.
As vaccinations increase, the country could potentially return to pre-pandemic spending rates by the end of the year. Employment has largely recovered after its 14.3% drop in April 2020, and job gains have averaged about 1% per month since then. Already, consumers are spending more on services, travel, and health-related items. These trends will likely continue throughout 2021 as the economy continues to rebound.
This article does not constitute legal, accounting or other professional advice. Although the information contained herein is intended to be accurate, Cathay Bank does not assume liability for loss or damage due to reliance on such information.