Travel has edge over shopping this holiday season amid inflation

Retailers have a new threat this holiday season: wanderlust.

Americans are returning to the skies, filling hotels, swarming theme parks — and they’re showing a willingness to spend more of their money on trips.

That is setting up the fiercest holiday season battle for consumers’ wallets since before the Covid pandemic, with persistent inflation already straining household budgets during retailers’ make-or-break quarter. Retailers are juggling other challenges: selling off excess inventory, trying to lure consumers who already bought a lot of stuff during the pandemic and wooing shoppers who have become more budget-conscious.

For the travel industry, it’s been a year of recovery. Delta Air Lines, Mastercard and Airbnb are among the companies enjoying windfalls. Other companies have also indicated a shift toward experiences and services. Live Nation reported double-digit attendance growth at theaters, arenas, stadiums and festivals. Starbucks said customers are springing for pricy drinks like pumpkin spice lattes.

“The trend towards spending on experiences continues,” Mastercard CEO Michael Miebach said on a quarterly earnings call late last month. “We saw notable strength in airline, lodging and restaurant spend with a shift away from categories like home furnishings and appliances.”

The pullback in spending on goods already has some retailers warning of tougher times ahead. Amazon shocked investors in late October with a weaker-than-expected forecast for the end of the year as e-commerce growth slows, and the company announced a corporate hiring freeze. Appliance giant Whirlpool cut its estimates.

Shipping giant FedEx missed expectations in its September report. CEO Raj Subramaniam said he anticipates a “worldwide recession.” U.S. retail sales were flat in September, a sign of inflation taking its toll on consumers, since the figures are not inflation-adjusted.

Walmart, Target, Home Depot, Macy’s and others will deliver their own updates to investors in mid-November. Walmart and Target over the summer disappointed investors when they detailed the financial toll of excess inventory.

Travel spending has soared, due in part to flexible office policies that are allowing Americans to travel more and book jaunts to Europe well into the traditional offseason.

As of September, airline ticket sales were up more than 56% from a year ago, and rose 10.9% versus the same month in 2019, according to Mastercard Spending Pulse, which measures in-store and online retail sales. Lodging sales shot up more than 38% from a year ago, and were up 42% versus September 2019.

“Taking the annual vacation, I think, is an entitlement for people,” Hawaiian Airlines CEO Peter Ingram said in an interview last month. “After having been deprived of that for a couple of years when there were restrictions on the ability to move around, people are really embracing it and going out.”

United Airlines CEO Scott Kirby noted that more relaxed office attendance…