Despite recent news that many Americans don't feel comfortable taking paid time off, the number of travelers is up this summer. They're buying more gas for road trips, and they're putting more travel and leisure expenses on their credit cards. That's the word from the American Automobile Association's latest update on travel expectations for Labor Day weekend, and from recent MasterCard reports on fuel purchases and consumer spending.
What's driving the growth in summer travel?
This past weekend was set to see the biggest number of Labor Day travelers since the 2008 recession, with nearly 35 million travelers setting out on one last summer getaway. Of those vacationers, almost 30 million will be making a road trip of at least 50 miles from home, according to AAA.
Cheaper gasoline fueling holiday road trips
Part of the increase in holiday travelers can be explained by lower gas prices, which have been trending downward all summer. AAA's weekly fuel price report from Aug. 25 showed the national average unleaded gas price is at its lowest since the end of February.
Consumers responded by filling up their tanks more frequently, according to MasterCard, buying 1.6% more fuel than they did in summer 2013. Summer holiday fuel purchases rose even more sharply compared to last year, with 4.4% more fuel bought during the week of Memorial Day, and 3.7% more over 4th of July week compared to last year.
Optimism outpacing income growth
It's easy to see these extra vacations as a sign of stronger earning power, but the travel trend seems to indicate more optimism than extra cash. AAA attributes the growth in travel to a boost in consumer confidence, with July's consumer confidence index higher than it's been since before the recession. In fact, consumer spending is outpacing income growth. Spending is projected to rise 3.8% in the third quarter of 2014 over the same time last year. Disposable income is expected to grow by just 1.4% over last year during the same time -- meaning more travelers are putting their summer trips -- even the cheaper gas -- on credit.
MasterCard's consumer-spending data backs that up, with indications that more consumers are using credit cards for vacation expenses. According to the credit card company, airline tickets, restaurant meals, and hotel stays were the top spending categories in July, and overall retail spending was up 4.6% over the same time last summer -- the biggest such increase since late 2012.
Room for more growth
Any time credit card spending rises, there will be some concerns about increased household debt and the problems that can arise from that. But it seems that American consumers aren't too worried. On the heels of July's bright consumer confidence figures, the August numbers from Thomson Reuters/University of Michigan show a further rise in consumer sentiment. The survey found that income and savings are up a bit, while overall consumer spending was actually down slightly in July -a fact that shows just how well the travel sector is performing compared to the overall economy.
The synergy between the travel sector and credit card companies helps, too. From die-hard "travel hackers" who sign up for cards that award lots of travel points to average travelers like me who book packages online to lock in discounts, many consumers find that it makes financial sense to whip out their credit cards when they're planning a vacation.
Of course, there can only be travel spending when people actually take a vacation -- and more than 40% of American workers don't take all the time they earn, according to a recent U.S. Travel Association report. One-third of those who don't use all of their days said they can't afford to take a vacation.
The current growth in vacation spending is promising. But the real boost to the tourism industry and the broader economy will come when that large minority of workers finally feels financially secure enough to book getaways for themselves. When that happens, the travel sector's true strength will be revealed.
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