Are consumers going to take a vacation from buying things?
The cost of goods is increasing, and while inflation is causing customers to trade down and look for deals when they are at home, they are still spending money to go on vacation — so much so that it seems to be keeping people employed in the hospitality sector.
The leisure and hospitality industry added 84,000 jobs in May, while the retail industry lost 60,700, according to Business Insider. Travel, vacations and spending on services remain steady as spending on goods flattens, making it appear as though Americans would rather indulge in vacation experiences than on products in stores. While leisure and hospitality led all industries in job growth in May, the vertical still fell behind the February 2020 payroll by 1.3 million.
The current trend, however, is not unique to today’s inflationary economy. As early as 2014, surveys were finding that Millennials, in particular, were more interested in spending money on experiences than purchasing new possessions. One market research study by Eventbrite from 2014 found that spending on experiences trumped buying things for 78 percent of Millennials. That generation, which was at the time between 18 and 34, reported participating in live events like concerts and festivals at a higher rate than older generations.
By the late 2010s, retailers across segments were experimenting with “experiential” concepts that gave customers something to do besides just buy. Instagram-friendly retail-tainment pop-ups like The Museum of Ice Cream drew nationwide attention, and retailers like Target partnered with them to bring their brands to the shelves.
Some retailers even started making moves directly into hospitality to capitalize on Millennial experience seekers.
West Elm, for example, announced that it was opening a number of hotels in 2018 that would focus on guest experiences and also feature the chain’s products, though an article from Atlas Hospitality Group published in mid-2020 details legal issues surrounding development that stalled the retailer’s plans.
Much of the world of experiential ground to a halt at the beginning of the pandemic, due to forced business shutdowns.
- Americans are spending less on goods and more on vacation — and that resulted in retail stores shedding 61,000 jobs last month – Business Insider
- Millennials – Fueling the Experience Economy – Eventbrite
- West Elm Hotel Plans Stall With Lawsuit Involving Development Partner – Atlas Hospitality Group
DISCUSSION QUESTIONS: Do you see U.S. customers spending a greater percentage of their disposable income on vacations and other experiences rather than on goods? How can retailers make themselves more attractive to shoppers more focused on vacation/leisure experiences?