Two huge indicators signal that the American economy is in a recession. How will tourism and travel handle another hit after pandemic shutdowns?
Who is ready to talk about something just utterly unpleasant that is likely to impact all of us, but even more so those who are already struggling financially? What a horrendous topic to have to write about. But here we are and we gotta talk about it. The recession is here.
The White House is trying to get ahead of a report coming out this week that is likely to show two quarters in a row of economic contraction. That’s the definition of a recession. Or at least it was until the White House decided to try to redefine it. It’s not surprising that politicians and mass media would attempt to redefine something so basic — they’ve had a pretty easy time of persuading dunderheads that “woman” and “man” are indescribable ideas. My guess is they won’t be attempting to redefine what a “good economy” looks like when we get back to one of those. It’s only when things get dire that people suddenly want to switch the meaning of words. What is the quote though? A bird is a bird no matter the word. I forget how it goes.
Anyway, I’m not trying to get political here, but I do need to make the point in a way that is logical and straightforward. Unless you’re some sort of zealotous follower of a political movement, it’s clear we’re in a recession. Definitively, we’re in a recession. That has consequences. Let’s talk about them — specifically how this is likely to impact travel and tourism, two things we cover heavily here.
First let’s dive into retail. Often the big box stores tell us where the economy is going. If two retracted quarters isn’t real enough, Walmart and Target usually are. Here’s what is breaking tonight:
Top U.S. retailer Walmart Inc (WMT.N) on Monday slashed its profit forecast as surging prices for food and fuel prompted customers to cut back on discretionary purchases, and its shares slid 10% in trading after the bell.
Shares of rivals including Target (TGT.N) and Amazon.com (AMZN.O) also tanked after Walmart’s warning, which signaled a “proverbial train wreck” for retailers, Burt Flickinger, managing director at Strategic Resource Group, said.
Walmart, a bellwether for the retail sector that caters to cost-conscious shoppers, said its full-year profit would decline 11% to 13%, compared to the 1% fall it previously forecast. It pledged to cut prices of clothing and general merchandise more aggressively than it did in May to reduce a spring backlog.
— Siddharth Cavale, Reuters
For those of you wondering, that is what we call “really, really bad news.” Walmart is a huge part of the American economy and specifically is a great index of how consumers are feeling. If Walmart is slashing its profit projections and losing 10% of its value as a result, this is something that could start a cascade. Target and Amazon are already following suit. This is the type of economy that is teetering on a major slide and you can trust the pundits all you want… I’m not thinking most of them have our best interests at heart.
Alright, so let’s talk about how a potential recession could impact tourism and travel.
In review of the 2008 recession, which was quite severe, it seems that regional tourism faired better than big destination tourism. In other words, places like the Hamptons probably handled the recession better than places like Orlando. Spots that are fueled by short-distance guests are better off than places that need long-distance travel. We’ve already seen that this year over the past month in which lower gas prices have been fueled not by policy decisions but by lower demand as Americans cut and curtail their vacation plans.
Gas Prices Force 82% of Americans to Limit Summer Travel Under 500 Miles
Here’s an excerpt for how Disney World handled the recession of 2008:
LOS ANGELES: With the economic recession bringing down footfalls in its theme parks, entertainment giant Walt Disney Co has announced that it has eliminated about 1,900 jobs.
Disney, which employs about 80,000 people in its parks and resorts unit, said 1,200 people were laid off and about 700 positions were left unfilled in domestic theme parks.
The bulk of the cuts occurred at Walt Disney World in Orlando, where about 1,400 jobs were eliminated. About 300 jobs will be cut from the Disneyland Resort in Anaheim, with the remainder coming from corporate headquarters in Burbank, the Los Angeles Times reported.
The company set the stage for the job reductions in February, when it announced a reorganisation of its parks and resorts operation.
— India Times
We also know that during a recession, corporations tend to cut way back on theme park and resort investments. While I don’t expect to see Universal Studios Epic Universe delayed or reduced in scope, I also don’t see much else on the horizon for many of our domestic parks. Yes, Dollywood is putting in a new roller coaster and Disney will spend some money on redoing a beloved attraction for social reasons… but it’s hard to be mad at companies for playing wait-and-see at this moment.
Yesterday, 7/24/2022, #DisneyWorld Crowd Levels:
⭐ Overall: 6/10
🏰 MK: 6
🌐 EP: 4
🎬 DHS: 7
🌳 AK: 6Highest wait: Star Wars: Rise of the Resistance, 280 minhttps://t.co/xQfktlFadM #WDW pic.twitter.com/11yRiSMsWT
— WDW Passport (@WDWPassport) July 25, 2022
As international travel slows down, Disney World summer crowds are dwindling back down to average at best.
Over the past two years, we’ve seen a major push towards camping and trips to national parks / forests. I think that movement is going to continue. We recently covered how the biking industry is booming, specifically e-bikes. I think that’s also a more recession-proof leisure market. But I have to tell you, if we hit a hard recession like it appears we may, this is going to be extraordinarily tough on many tourist destinations. We’re talking about restaurants and shops that have been shuttered the better part of the last three years… and now we’re going to hit them with a recession where people are pinched on how much they can spend for fun. This will be an inflationary-driven recession, not a housing or other bubble burst recession. That means the fun money is going to evaporate first. I really do worry about the mom and pop spots along the coasts. I worry about medium-sized tourism locales. It could be a very difficult couple of years with a lot of anguish for those who run them.
I wish I had better news. I guess the thing I can offer is that I truly hope none of this happens. But if the Walmart profit warning and two quarters of retracted economic output are indicators (and they are), this could get choppy fast. It already has been.
For all the latest news that should be fun, keep reading That Park Place. As always, drop a comment down below and let us know your thoughts.
