Anchor readers will know that consumers increased their preference for spending on "Fun" versus "Stuff" during 2023. In our 2024 consumer outlook, our view was that Fun’s wallet share capture would likely be muted this year. With more Q4 2023 updates from travel and hospitality operators this past week, we’ve seen several developments that affirm this stance. Recently, Expedia, Airbnb, and Bookings Holdings reported Q4 2023 results and provided 2024 outlooks which we show in the table below (these are global figures). For Q1 2023, leisure travel ("Fun"), as measured by bookings, captured almost $19B of the increase in consumer spending. That resulted in less spending in other discretionary categories ("Stuff"). For Q1 2024, the increase slows to only $5B, or roughly a quarter of the year ago period. That will leave a lot more spending capacity for Stuff; moreover, we can think of no reason for the narrative to also be true for 2024 in total.
Hilton and other hospitality operators reported quality results and issued solid outlooks in both demand and expansion. Hilton’s plans include 33,800 new rooms for approved development during the Q4 2023, bringing Hilton's development pipeline to a record 462,400 rooms as of the end of December, representing growth of more than 11% year-on-year. Its RevPAR (revenue per average room) guidance of +2%-4% signals good demand and more balance in supply/demand (For reference, 2023’s RevPAR was +12.6%). In terms of customer type, 2024 is expected to benefit from the ongoing recovery in business transit and corporate events, leisure sounded relatively “flat” on the earnings call. As it relates to international leisure in/out of the U.S., Hilton CEO Chris Nassetta said, “I think we're going to see a much stronger inbound year. That doesn't mean outbound is going to be bad. But I think with what happened with the value of the dollar last year, you had the strength there, drove a lot of international travel, particularly to Europe.” Nassetta’s viewpoint aligns with our own, which implies better retail results in U.S. tourist gateway cities like New York in 2024.
On its Q4 2023 update, Airbnb’s CFO David Stephenson said, “When we were on this call a quarter ago, we have seen some softness in demand in October. And then we guided to that kind of expectation. Then what we saw is accelerating demand in November and December. As we come into that strength--17% revenue growth and 12% nights growth in the fourth quarter--we're seeing really stable demand coming at the start of the year. You have to actually rewind the tapes and remind yourself that we were just exiting kind of Omicron, and there's a lot of pent-up demand in January of last year, which makes for some harder comps in Q1 2024.” Said differently, Q1 2024 and full-year 2024 is to be a more normalized period versus one fueled by revenge travel. Net-net, spending on Stuff (i.e. general merchandise) at retailers looks like it will be stronger in 2024 than last year, once we get past the abnormal weather and beyond pandemic anomalies in Q1 2024.
