Americans on the road again as economic recovery gains traction

Bloomberg NewsJuly 3, 2014 

Traci Butler and her husband cut out vacations after the U.S. recession five years ago. This week, the couple is taking their two boys on a weeklong trip that includes a July 4th visit to the nation's capital, just a few weeks after touring Italy on their own.

In the aftermath of the recession, "things were much tighter," said Butler, a special education teacher from Washington, Ill., whose husband works for construction machinery maker Caterpillar. "We didn't have bonuses for a while. The last two years have been better."

About 34.8 million people plan to drive 50 miles or more from home during the five days ending July 6, up from 34.1 million last year and the most since 2007, AAA, the biggest U.S. motoring organization, said June 26. The travel recovery is boosting sales for hotels and attractions, a sign that consumer confidence and consumer spending are on the mend, said Mark Zandi, chief economist at Moody's Analytics in West Chester, Pa.

"Stronger business travel and tourism is a very good barometer of the health of the broader economy," Zandi said. "Spending on travel is more discretionary and expensive. The revival in travel is thus a good sign that the economic recovery is gaining traction."

Hotel occupancies across the U.S. averaged 62 percent during the first five months of this year, up from 60 percent during the same period last year and the highest average for that time frame since 1996, according to data provided by Hendersonville, Tenn.-based research firm STR. Average room rates climbed 4.1 percent to $113.58.

The Federal Reserve, in its Beige Book report of regional economic conditions from its 12 banks on June 4, described travel as "fairly strong across most of the country in recent weeks. The Boston, New York, Richmond, Atlanta, Minneapolis Districts reported increasingly robust tourism activity, and Philadelphia noted slight growth; Dallas observed a pickup in passenger airline demand."

Parts of the U.S., including the New York and Philadelphia areas, "attributed some of the pickup to the marked improvement in weather driving pent-up demand," the Fed said. "Boston credited the 2014 Marathon for much of the strength in April, and Atlanta cited strength in international visitors."

The current expansion follows a first-quarter slump blamed in part on severe weather. Spending on travel and tourism fell at an annual rate of 1 percent after a 4.5 percent increase in the fourth quarter, the U.S. Bureau of Economic Analysis reported June 27.

Since the recession, the travel industry has added 749,000 jobs to employ close to 8 million in May, a record high, according to the U.S. Travel Association, an industry trade group based in Washington.

"There is broad optimism," Marriott International Chief Executive Officer Arne Sorenson said on a conference call with investors on April 30. "The economic recovery is broad and steady and ought to continue."

Stronger markets have included San Francisco, San Diego, Los Angeles, Dallas and Denver, the Bethesda, Md.-based company said. Florida has had "strong leisure demand" Chief Financial Officer Carl Berquist said. New York was hurt by winter weather, but demand is "very strong globally," Sorensen said.

At the 1,957-room Marriott Marquis in midtown Manhattan, "we are slightly ahead of the pace for bookings" for July, said Kathleen Duffy, director of public relations for Marriott's New York hotels.

"People and businesses are feeling more confident, and that is reflected in travel spending," said Nikhil Bhalla, lodging analyst at FBR & Co., an investment banker in Arlington, Va. "People are taking more and longer vacations."

Fifty-one percent of U.S. residents are planning to spend at least $2,000 or more on their summer vacations this year, versus 44 percent last summer, according to a survey by Chicago- based Orbitz.com, a travel website. An estimated 88 percent planned a vacation this year, up 11 percentage points from a year earlier, the survey found. In another sign of higher demand, air fares are up 6 percent for Memorial Day to Labor Day and hotel rates are up 12 percent, according to Orbitz.com.

In Washington, Harry Faulkner, who drives a pedi-cab, said he's looking ahead to an "absolutely insane" July 4th weekend.

Business has been steady and "should get better soon," said Sam Jun, 62, who has a T-shirt and trinket stand outside the Washington Monument. Sales are "better than three to five years ago, but not as good as 10 to 15."

Butler, from Illinois, says she's traveling again following the economic downturn, after her husband's employer "laid a lot of people off during that time."

"We luckily were not one of them," she said. "We lost bonuses and we didn't travel during that time."

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