Though it often felt like the winter would never end, Memorial Day weekend is here, which means summer has arrived, even albeit unofficially. And while others are heading to the beach, firing up the BBQ’s, going out for soft-serve ice cream and scouting out baseball tickets – we here at PYMNTS are thinking about, what else, payments and commerce.
So, when we ask people “so how are you planning to spend your summer vacation?” the answer we seek isn’t at all about how and where people will spend their summer vacation. Nope. What we’d like to know is, literally, what they will spend, and how they will spend it.
So, in anticipation of a weekend filled with those queries of our family and friends, we thought it was time to talk to the experts. That’s when we turned to industry expert and SVP and Group Head of Market Insights for MasterCard, Sarah Quinlan, to talk summer commerce trends. Living up to her “Duchess of Doom” moniker, Quinlan did predict that the average American consumer will put a chill on retail, potentially, since they have put a spending freeze on their wallet when it comes to buying traditional items such as clothes, electronics or housewares from big name retailers.
And while that might be a little disheartening, the goods news is that the “staples” might not be the best way to look at how consumers act when they are having fun in the sun. Quinlan takes PYMNTS on a tour of some interesting summer spending insights, including which industries are going to thrive and why spending on experiences is just getting consumers to open their wallets.
PYMNTS: So, Sarah, look into your crystal ball and tell us, just how will consumers SPEND their summer vacation?
SQ: Consumers this summer will spend experientially, continuing a trend we’ve seen this past year. This means they will be flying and staying in hotels, dining out and enjoying the entertainment in their vacation locales. As only 27 percent of Americans have passports, the bulk of this spending will be done within the U.S. We also expect that some will travel abroad, taking advantage of the stronger dollar.
PYMNTS: Is this any different from what we saw last year?
SQ: This is a continuation of what we saw in 2014 but a change from prior to that when people drove more for vacations as opposed to flying, where we know they spend double what they spend on a driving vacation. Right after the recession, people cut back their spending completely and only took staycations from their homes, so this is a welcome show of consumer confidence. Consumers are planning vacations in advance and have the confidence that they will be able to pay for them later.
PYMNTS: Will this vary by segment – millennials versus boomers, for example?
SQ: Both millennials and baby boomers are prioritizing experiences over goods. The only difference in spending might be the actual dollar amount, reflecting individual income situations.
PYMNTS: How will this vary by region of the world?
SQ: Outside of the U.S., the only other country where we expect increased travel spend would be the U.K., reflecting strong consumer spending there.
PYMNTS: Many luxury retailers say they are taking a hit in the U.S. given the lack of tourists visiting us here given the strong dollar. Do you think that trend will carry through into the summer? And, or, could it have the reverse effect – more U.S. consumers visiting Europe and spending there?
SQ: Luxury as a sector is hurting globally. The Northeast region has been the weakest within the U.S. for total retail sales, a reflection of the downsizing of the financial industry combined with the strong dollar, which has restricted tourism spending. Also, there are major challenges in many traditional luxury spending communities (Russia, the Middle East, Brazil and China) that will further restrict this space. Americans, despite their incomes, are not expressing interest in spending this way so we do not expect it abroad.
PYMNTS: So, wouldn’t you know, gas prices are eking up a bit – just in time for summer – but the low gas prices haven’t really put any more $$ into retailers’ pockets. Will gas prices influence spending this summer – on travel, and in general?
SQ: When you exclude gas and auto from retail sales, we are actually seeing strong and steady growth. That means that consumers are spending, they’re just more thoughtful about how they spend.
PYMNTS: OK, so really look into your crystal ball this time. If you were forecasting the weather for retailers this summer, what would you predict? Sunny? Cloudy and stormy? Fair?
SQ: Whether or not there are blue skies ahead for retailers depends on who you are and what you are selling. Those retailers who can create an experience for their clients will continue to outshine the others. Traditional goods retailers could partner with those sectors such as restaurants and entertainment to offer more to their clients and raise the “value for money” proposition. It will be all about the experience!
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Senior Vice President of Market Insights, MasterCard Advisors
Sarah Quinlan is a Senior Vice President at MasterCard Advisors, responsible for Market Insights, which produces MasterCard SpendingPulse, a macro-economic indicator. Her team develops products that utilize MasterCard’s aggregated anonymous transaction data to delineate actionable trends. Prior to joining MasterCard Advisors, she was the Founder and CIO of Katen Capital, a global macro hedge fund manager. Previously, she was the Chief Investment Officer and Head of Alternatives for Saad Financial Services, S.A. Prior to joining Saad, she was a portfolio manager at UBS, and at Lloyds TSB focusing on alternative investments. She was co-founder and portfolio manager of TwentyFirst Century Advisors, a small and mid-cap long/short hedge fund which was ranked in the Top 10 of Mar Hedge.