Visits to popular tourist destinations are down mid-2022 but travelers have more money. The hotel industry is now shrinking on the whole, but discount brands are booming. What does this indicate about the state of a United States recession? Let’s dig in.
Traveler Behavior Data
From a data perspective, looking at traveler behavior across all parts of the United States does not give the most reliable way to go about tracking a United States recession. Why?
People travel all the time, in big cities and little towns, but the volume and impact of those travels are relative economically. What we want to conduct our analysis is a sample of the most popular travel destinations that routinely draw crowds, even if they’re a little smaller these days.
So, much like the Consumer Price Index is based on a basket of common products, we have created a basket of popular tourist locations.
The graphic below shows the areas we studied, including their Federal Information Processing Standards (FIPS) code. Focusing on this representative bucket should allow us to more accurately capture tourist behavior as a potential indicator of United States recession.
The first chart shows us median daily tourists (or a year over year difference) across our basket of areas. Negative numbers means a decline vs. the year before. The second plot shows the median income level of travelers to the same basket of areas.
The first chart tells a certain story . . . Traveler traffic was seasonal in January 2019 as we enter the 30-month window of our analysis. Traffic peaked for the measured period in June of 2019 (again, seasonal), before crashing with the onslaught of the Covid-19 pandemic.
Have we seen a drop in travel traffic that may be an indicator of recession? Compared to pre-Covid, the answer is Yes – traffic to these areas is down nearly 40% from June 2021.
More worryingly, year-over-year foot traffic is down about 33% from the pandemic recovery era high of June 2021. For reference, traffic was down only slightly in February 2022 vs. 2021, indicating the rate of decline picked-up as the summer of 2022 approached. Again, this seems inline as an indicator of a United States recession.
Interpretation of the second chart is difficult without the first chart as frame of reference, but we can essentially get to one of four things:
- Increasing Median Tourists and Increasing Income:
Best case scenario. More people are traveling and the income of those travelers is higher, could lead to more spending. - Increasing Median Tourists and Decreasing Income:
More of the general population is traveling, including especially those in lower income brackets. Could indicate a high level of consumer confidence as it means people feel safe spending money on vacations - Decreasing Median Traffic and Increasing Income:
This is a bad sign, as it indicates that only the wealthy are feeling safe enough to travel - Decreasing Median Traffic and Decreasing Income:
This situation seems unlikely, but it would mean that fewer people are traveling, and those that are traveling has less money to spend
Given the rules above and the fact that median traffic is decreasing with a declining trend, we’d have to call rising income levels of travelers as another possible indication of recession, though perhaps with less veracity than when we look at pure traffic data alone.
Hotel Foot Traffic
As another measure of travel, we can look at foot traffic in hotels. Both of these metrics are easy to interpret. The first chart shows the average monthly person count at a single hotel venue by brand. The second chart shows the YoY change in visits across all hotels we measured as part of this analysis. As in the previous plots from selected tourist locations, these plots need to be interpreted together.
Since around July of 2021, Motel 6, a discount brand, is in a class by itself for foot traffic. No other hotel brand we looked at has shown the same level of growth over the last 30 months and through the Covid-19 pandemic, though there is a small amount of net 30 month growth in the industry.
We see that, overall, visits to hotels are up about 100 million since October 2019; not bad but nothing to cheer about. That said, the fall-off from April 2022 until June 2022 is precipitous and roughly inline with the developing timeline of the United States recession narrative, which feels like a growing indicator of recession in Q3 of 2022.
Net-net, travelers are visiting hotels a little more than they did in late 2019 but much less than they were just a few months ago. They’re also staying at less-expensive hotels.
Questions Left Unanswered
While overall foot traffic volume of travelers to our selected basket of tourist areas is down, their average traveler's income is up. On the surface, this would indicate that only people who are better off are traveling – a worrying sign.
That said, hotel foot traffic overall is higher than it was this time last year and most individual hotel chains are seeing some YoY growth, with Motel 6 pacing the field. So, a seemingly positive indicator (i.e. negative of recession).
In order to predict and interpret future trends in the hotel industry, we think there are two important questions to answer:
- Will current indications of a decline in hotel foot traffic continue and will that negatively impact growth?
- Will discount chains, such as Motel 6, emerge as a coalesced strength in the hotel industry?
Given a ‘Yes’ to the questions above, then the call has to be for a foreseeable period of United States recession that adversely affects travel to popular tourist destinations, as well as stays at hotel chains that cater to more affluent travelers.
