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Strong consumer optimism will help keep travelers on the move as tourism season kicks off
Last week (May 5-11) was National Travel and Tourism Week. The concept was established in 1983 by President Ronald Reagan as way to salute the travel and tourism industry and highlight its importance to the US economy. The early May timing serves as a kick-off to the summer travel season, generally considered to run from Memorial Day through Labor Day. While overall economic growth is forecast to cool during the second and third quarters this year, optimistic consumers with rising disposable income will help 2019 continue the steady growth that the travel and tourism industry has seen since the recession in 2009.
The most recent data from the U.S. Bureau of Economic Analysis, current through Q3 2017, show that US total tourism related employment was nearly 8 million jobs. The US Travel Association states that total federal and local taxes generated by travel spending totaled $181 billion in 2018. The impact of the travel industry extends well beyond those establishments that directly interact with visitors, from the supply chain needed to support the industry to the benefits of the taxes generated by visitor spending. IHS Markit recently completed its annual study with Destination DC, the destination marketing organization for Washington DC, and our findings show that without tourism the nearly 300,000 DC households would have to contribute an additional $2,844 per household in taxes in order to maintain the current level of DC tax receipts.
While the current expectation of lower overall economic growth might lead to some concern about the 2019 summer travel season, the underlying fundamentals point to a more solid outlook. The IHS Markit forecast for real consumer spending growth is 2.7% for the rest of 2019, a marked increase from the weak first quarter results. Employment and income trends are positive and a bounce-back in equity markets have all helped support consumer optimism. The University of Michigan Consumer Sentiment index edged lower in early April yet remains well above its January level. The Conference Board Consumer Confidence Index rose 5.0 points in April. Consumer confidence has remained beneath levels seen in the latter half of 2018, but is 4 points above April 2018 and in historical context remains high - both indices are at levels near their 2018 average, which was the highest since 2000 for each index. Within the Consumer Confidence survey 52.3% of Americans stated an intention to travel within the next six months, a rate 2.4 points above the April 2018 survey. This optimism bears out in the IHS Markit/AAA forecast of travelers for the upcoming Memorial Day holiday, where we expect travel to rise by 1.5 million from last year as 42.8 million travelers are expected to take to the rails, roads and skies during the holiday weekend kicking off what we expect will be a strong travel season.
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