|Capricious Consumers or Wayward Surveys?|
By Vijay Dandapani
Saturday, 14th July 2012
Wyndham Hotels recently issued a relatively optimistic prognosis for the rest of the year saying 'Global Vacation Budgets on the Rise'.
The hotel giant's survey was premised on the finding that "travelers around the globe are rising above recent economic uncertainty by not only vacationing this summer, but increasing their allotted budget to do so."
Wyndham's goal was to "better understand the vacation spending habits of Wyndham Hotel Group's global guests, the survey polled just over 5,600 adults in key cities throughout the U.S., Brazil, Canada, China, and the U.K. and had other interesting conclusions which are noted later below.
However, the very idea of consumers feeling better about their financial situation and rising above a pervasive economic gray cloud is less than clear based on seemingly contradictory findings commissioned by different yet reputable corporates.
Firstly, the Consumer Reports Index put out by Consumer Reports has an almost wildly optimistic outlook suggesting "a sharp improvement in its consumer sentiment measure, which jumped to its highest level since October 2008." Citing a decline in financial difficulties the index says that the gains in consumer confidence was "broad based" since the gains were amongst households earning less than $50,000 per year (as also for those in the $100,000 + bracket). Since more than half of US households fall in the former catergory that would represent a material improvement.
"With more than half the country earning less than 50,000, any improvement among that group may have a significant impact on the economy. They still have some distance to climb, but these are positive signs,rise in sentiment (53.1 from 47.5 the previous month) was broad-based, with significant gains among those Americans in households earning less than $50,000 (+5.5 pts) as well as more affluent households earning $100,000 or more (+7.7 pts).
Consumer Reports' rosy scenario is directly contradicted by Bloomberg' Consumer Comfort Index (CCI) issued almost simultaneously. Bloomberg's darkly pessimistic prognostication. With "slower job growth and an unemployment rate that’s exceeded 8 percent for 40 straight months" Bloomberg's CCI said consumer confidence "dropped last week from a two-month high as fewer Americans considered it a good time to spend and their views of the economy languished." The financial services company also gloomily pointed out that lower gas prices failed to perk up consumers.
On a similar note for a related industry Standard and Poor's Industry Investment Review suggested that the "fundamental outlook for the leisure facilities sub-industry for the next 12 months is neutral, reflecting a slow-growing U.S. economy." For the state of New York ADP also chimed in with a negative outlook on consumer confidence saying "New Yorkers are pinching their pennies".
While it is unclear yet which consumer will emerge in the latter half of this year, Wyndham's survey had interesting asides on the profile of international travelers. Most Americans intend to spend "any extra money on extending their vacations with a majority of their budget outside of hotels spent on entertainment and excursions in contrast to their Brazilian and British counterparts who look to "fork out more on dining and shopping".
The latter is a good outcome for cities like New York which have far more to offer in terms of dining and shopping and spending figures from inbound travel from Brazil and Britain reflects that.
Vijay is Chief Operating Officer and part-founder of Apple Core Hotels- a chain of 5 midtown Manhattan hotels offering value and comfort in the heart of the city.Member of the board of Directors - Hotel Association of New York.