00:00Jodi, you just released this annual travel survey, and I was scrolling through it this morning.
00:05There's a lot of interesting information there.
00:07It seems like people are curtailing travel, but only in certain sectors, like more domestic than overseas.
00:13Is that financial? Is that security reasons? And what are the numbers that you're seeing?
00:16So I think it's really interesting.
00:18So just taking a step back, our travel survey, we do it every April and November.
00:22This is our sixth one that we've done.
00:24And we poll people, and we say, okay, is vacation a priority, or what are your priorities?
00:31And out of the 3,100 or so people that responded, 1,000 said vacation's a priority.
00:36Once that's true, then we ask them a ton of vacation questions.
00:40Obviously, if they're not traveling, we don't care.
00:43They're not going to have preference on Delta over United.
00:46So what we found in April, which is so interesting, and mind you, we did this right before Hantavirus, right
00:51before Ebola.
00:52So it's not related to health scares that are circulating at the moment, is that people are still traveling, very
01:00much so, still traveling.
01:01And people are planning already to increase their budgets should cost exceed them.
01:07So they're saying, okay, I know that inflation exists.
01:1156% of people said inflation exists.
01:13I'm feeling it.
01:14I'm feeling it.
01:14I'm scared about inflation.
01:16That's the reason why I'm increasing more.
01:17But 24% already increased significantly going into this year, already increased significantly from the start of the year.
01:24So that's pretty substantial.
01:25Are they making difficult decisions about how they're getting to one place or another?
01:30We had somebody on yesterday.
01:31We were talking about that age-old calculus, do I drive or do I fly?
01:34Is that being thrown out of whack because of the rising cost of both fuel for the car and fuel
01:38for planes?
01:39A little bit, David.
01:41But I will say that more so, it's the quality.
01:44So people want to spend more on accommodations.
01:48They want to live large with accommodations.
01:50They want to live large with premium and business class travel.
01:53This is Christina's story completely.
01:55But here they just keep making fun of me because I like fancy travel and I'm too cheap to spend
02:00it.
02:00So I end up just staying here is what ends up happening.
02:03I'm not one of the people who will spend it, but it sounds like people will.
02:06Well, I don't think you're unusual there.
02:09So I will tell you that despite the fact that people want to go and they want that first-class
02:15experience,
02:15they want that nice, fancy Waldorf Astoria experience,
02:21they're also saying that they can't necessarily spend that kind of money.
02:26So they're willing to cut back on accommodations and they're willing to cut back on business travel.
02:30And so while they want to spend on the high-end hotel, they might settle for the mid-level hotel,
02:37which is interesting because my colleague Brian Egger on the equity side has written something similar related to the C
02:43-shaped economy,
02:43which is something that Hilton said.
02:44I was just going to ask you if this is a K-shaped travel economy.
02:47All right, so tell me about a new letter.
02:48Why is it a C-shape?
02:48Right, exactly.
02:49Why is it a C-shape?
02:50Right.
02:51So I actually, I like the K-shape better.
02:52I think it's a little more understandable.
02:54But the concept of the C-shape is that people are trading down.
02:58So they're like gradually trading down to mid-tier.
03:01I think probably that upper echelon, there's no like C there.
03:04It's probably like a straight line there.
03:06Yeah, yeah.
03:07There's like maybe like a double C or something.
03:08I don't know.
03:09So who is benefiting from what you're seeing these trends?
03:12Is it a certain hotel chain, a certain airline, especially if you're cutting back overseas travel?
03:17I imagine that benefits some airlines more than others.
03:20Right.
03:20So I think the major airlines are still going to do well.
03:23You know, my colleagues in Princeton and I, so George Ferguson and Francois Duflaut, we've been working together on this.
03:30And something that we've seen is that people are still willing to use the majors.
03:35And, you know, they're benefiting from the fact that higher income earners are still very much traveling.
03:40There is a dichotomy in that K-shape, right?
03:43And so what we're seeing is that high income earners are still willing to travel.
03:47They might not travel as fancy, but they're still willing to travel.
03:50And they're also more loyal to some of these brands.
03:52So you will see that the Marriott's, the Hilton's, the Hyatt's, the Delta, the United, and the American might do
04:00a little bit better than some of these other lower tier, second level brands.
04:05Interesting.
04:06Do we have any sense of how long this commitment to traveling will last?
04:10I think of the survey that we got on Friday, the University of Michigan survey showing consumer sentiment at this
04:14really low point in a trough.
04:17And it just made me wonder, like, how long can this continue?
04:19Yes, we're seeing consumers feeling the pressure of inflation, moving things around, as you've suggested.
04:24I'm prioritizing this or that.
04:25I'm going to do more of this or less of that.
04:27Is there a point at which people will say, enough's enough, I'm not going to do this?
04:31Or are we not there yet?
04:31Are they not getting themselves to that point in which they'll say, you know what, I can't afford to travel.
04:35I'm not going to do it.
04:36So, David, every time we run the survey, I wonder if we're going to finally see the end of the
04:42consumer, right?
04:42So, we had the revenge travel, right, revenge spending right before COVID, right after COVID, right now.
04:48And it was this giant boom.
04:50And then we said, okay, that can't live forever.
04:52And we are seeing some areas of weakness, like in regional theme parks and some of the destination theme parks
04:58as well.
04:58We're not seeing the weakness in cruise lines so much.
05:01That's been very surprising, despite everything going on in the world, despite the Middle East, despite, you know, health scares,
05:09back and forth, despite other wars that have happened.
05:11And price is going up because of fuel and everything else.
05:12Exactly.
05:13And price is going up.
05:14And it's not like the cruise lines aren't charging more because they are starting to do a little bit more
05:18of the a la carte, which is basically nickel and diming, right?
05:22So, you don't get, you know, on most cruise lines, you don't get, you know, soft drinks for free.
05:27You also have to pay for the excursions.
05:28You have to pay for all the extras.
05:30Yeah.
05:30Yeah. Not on Disney, actually. Fun fact.
05:32All right. Good to know.
05:33Yeah.
05:33I mean, the thing that struck me is you found that 76% of those surveyed, I cook very, we
05:39were talking about this yesterday, it's like the only thing that all of us will drink is I cook.
05:42Make your travel decisions based on it.
05:44I cook zero?
05:44Yeah. No.
05:45I'm not getting into that.
05:46Okay.
05:47But to put a point on everything you've been talking about very quickly, because I'm getting told we're running out
05:51of time, but 76% of those surveyed said spending on travel is more important than spending on clothing.
05:56Correct.
05:57People are just going to go, I guess, to the nude beaches. I don't know.
06:00There you go.
06:00No, I'm just kidding.
06:00That's it.
06:01It's more that people care about actually going and traveling.
06:05And I think people are also not spending on clothing the same way, right?
06:08So they're buying secondhand.
06:10They're looking at different ways to cut back so that they can have the Instagrammable photos, right?
06:14I guess you can't secondhand.
06:15She's got your number.
06:16The Diet Coke, the Disney Cruise, the Instagrammable photos.
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