Even with the lingering effects of inflation, a significant number of Americans are still planning to travel this summer. According to a survey conducted by Morgan Stanley and AlphaWise, 60% of U.S. consumers are gearing up for a summer trip. What’s interesting is that a higher percentage of consumers with incomes over $75,000 are making travel plans. Among those earning between $75,000 and $150,000, 75% have indicated that they will be traveling this summer, and this number rises to 78% for those making over $150,000. This shows that those with higher incomes are prioritizing travel over other discretionary purchases this summer.
The airline industry is also showing positive signs for the upcoming summer travel season. Ed Bastian, CEO of Delta Air Lines, expressed optimism about the demand for air travel, with record sales days recorded this year. According to Morgan Stanley analysts, premium airlines have shown strong resilience and growth since the pandemic. Premium cabin travel has consistently outperformed the main cabin by approximately 10 points. Delta Air Lines is touted as the top pick in this space due to its focus on premium services, which allow it to outperform overall airline demand.
While investor sentiment remains cautious in the gaming and lodging sector, there are noticeable trends favoring high-end properties. Upper scale and luxury lodging options are seeing higher revenue per available room compared to midscale and economy options. Marriott and Hilton are highlighted as companies that are well-positioned to benefit from this trend. Marriott, in particular, has been leveraging its scale and focus on high-end properties to achieve above-industry revenue growth. Hilton’s stable revenue per available room and strategic buybacks support a positive earnings forecast.
In the cruise industry, there is a mixed outlook for the upcoming summer season. While the industry experienced a strong resurgence last year after the challenges of Covid-19, analysts believe that revenue beats may not be as prominent this summer due to the long booking window for cruises. Royal Caribbean is being preferred over other cruise lines such as Carnival and Norwegian Cruise Line, as it caters more to higher-income consumers. Despite some positive momentum, cruise stocks have seen mixed results this year, with Royal Caribbean outperforming Carnival and Norwegian Cruise Line.
High-income Americans are prioritizing travel this summer, with a significant percentage of them planning vacations despite economic concerns. Companies catering to affluent consumers, such as premium airlines, high-end lodging options, and certain cruise lines, stand to benefit from this trend. As the summer season approaches, these businesses will need to capitalize on the increased demand from high-income travelers to maximize their growth and profitability.