Over the past long weekend in Europe and the US, I had the opportunity to do field research in the travel and leisure space. Given that my eldest son was graduating from a US high school, we had the dubious pleasure of crossing the pond during the busiest traveling weekend in May – also known as the first peak of the infamous driving season.
In a nutshell, my findings are that consumer demand overwhelms what is left of supply in the travel and leisure space after two years of the pandemic. The fact that hotel rates were doubled for weekend stays in the US may be the usual Memorial Day drill, but the lack of drivers leading to a two-to-four hour wait for a lift to the airport in North Carolina illustrates the unprecedented tightness of the US labour market.
Travel in Europe
The same holds true for travel disruptions in Europe, which were nerveracking, to say the least. Flight cancellations were happening everywhere, and security-check shortages at airports, such as Amsterdam and Stockholm, led to waiting times of several hours. In fact, the weekend exceeded anything the travel and leisure space had experienced before the pandemic-induced breakdown. All in all, this confirmed my view that the service sector is experiencing bottlenecks similar to those that the manufacturing space has seen over the past 18 months.
So the travel experience was an extraordinary one, but what does it mean for the economy and bourses overall? First of all, it seems that consumer demand remains super strong and is increasingly shifting to the service sector. This is a clear positive, as it should soothe recession fears after the recent consumer price shock. Secondly, bottlenecks in goods supplies should be easier to remove as demand shifts to the service sector. This shift was also supported by the policy response in China, which is a step in the right direction to spur production, albeit further and more tangible support may be needed over the summer to get the economy back on track.
Please note that, due to a public holiday, the next edition of the Research Weekly will be released on 13 June 2022.
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