Post-Pandemic “Revenge Spending” on Travel Is Waning, Easing Hotel and Airfare Prices This Summer
When people were cooped up in their homes during the pandemic, there weren’t many opportunities to spend money on things like vacations and hotel stays. After the lockdowns abated, people were eager to start dropping cash on luxury experiences.
Consequently, several industries saw a huge increase in consumer spending, as many Americans wanted to make up for lost time. The so-called “revenge spending”—a term economists and executives used to describe how consumers spent serious money after lockdowns—lasted two years, according to The New York Times.
The huge demand increased prices for airfares, hotels, and other travel-related services. However, it looks like spending might be cooling down, a change that might help slow inflation in the country.
Hotel prices are increasing at a slower pace on a year-over-year basis, and airfares dropped in May, The Times reported citing data from the Federal Reserve Economic Data (FRED) platform.
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“We see some slowing in so-called revenge categories,” Yelena Shulyatyeva, senior U.S. economist at BNP Paribas, told the paper.
Airfares and hotel spending are expected to play a critical role in inflation for June and July, the founder of the firm Inflation Insights Omair Sharif told The Times. He thinks this summer will not see the same level of lodging and flight spending the industries saw last year. “We’re just not getting the same kind of pop any longer,” he said. “Airfares have pretty much stalled out.”
The frugality may not all be attributed to waning enthusiasm; concerns linger that the Fed’s interest rate increases may spark a recession. Addressing this, Deutsche Bank chief economist David Folkerts-Landau recently said an economic downturn in America is inevitable.
“The U.S. is heading for its first genuine policy-led boom-bust cycle in at least four decades,” he said, according to USA Today. “The inflation we see was induced largely by expansive fiscal and monetary policy, and the aggressive rate hikes needed to tame that have now materialized. Avoiding a hard landing would be historically unprecedented.”
