American consumers’ leisure lives are working hard for card companies right now.
American Express AXP -2.80% on Friday reported that spending on its cards for travel-and-entertainment just about matched the prepandemic 2019 level in March. While large corporate travel spending and international consumers still aren’t back to those levels, U.S. consumers aren’t being held back by the state of the world these days and helped lead the recovery: In the first quarter they spent 20% more on T&E, adjusted for exchange rate moves, than in the same quarter of 2019, AmEx reported.
Rising prices might be squeezing people at the pump, but it doesn’t yet seem to be a big deterrent to buying longer trips. U.S. Bancorp reported earlier this month that its airline card spend volume was flat in March 2022 versus 2019, the first time the bank had seen a recovery to prepandemic levels. Bank of America said card spending on gasoline was up 42% from last year in the first quarter—second only to travel-and-entertainment’s 57% bump.
AmEx’s results indicate that it isn’t just higher prices driving higher volumes, but the pace of activity. U.S. consumer travel bookings were up nearly 50% over 2019. AmEx also noted that some of the increase is being driven by a return to higher-end hotel and restaurant purchases. The company’s Resy restaurant-booking service had one of its busiest months ever in March, with reservations jumping 16% from February.
It might be the case that once the itch to travel and go out again is scratched, consumers will have to start to spend more cautiously to prepare for inflation or out of fear for the economy more broadly. But a lot of the momentum is coming from key categories that could be more resilient.
At AmEx, Millennial and Gen-Z consumers’ total spending led the way, rising 56% in the first quarter from a year ago. Overall, exchange rate-adjusted net card fees—or membership fees—at AmEx rose 16% in the first quarter from a year ago. It takes a degree of belief in one’s economic sustainability to be willing to pay to access future card benefits. The younger cohort tends to use card perks more frequently: For example, AmEx has noted that Millennials and Gen-Z cardmembers use $200 hotel credit benefits twice as often as other age groups.
Business travel is also still in recovery mode. That tends to be less price-sensitive and generally has much larger purchase sizes. If Zoom fatigue continues to boost businesses’ conferencing or travel plans, it could help keep up volume numbers even if consumers were to fade a bit. Across all customer types, which includes big global corporations, T&E billings for AmEx were running at 75% of 2019 levels in January as the Covid-19 Omicron variant affected decisions—by March, it was at 99%.
Investors have certainly noticed the momentum, with American Express shares up by over 12% so far in 2022, and other card company stocks like Capital One Financial and Discover Financial Services down far less than banks overall. First-quarter results so far show that for now, consumer spending still has momentum.
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