At Forbes Travel Guide’s Summit last week in Monaco, Luxury Travel Advisor heard from several sources that there is strong consumer confidence, especially regarding the state of travel.
But is that the true story?
Rena Shah, head of Chase Travel group lodging and experiences, said during one morning’s general session, “We've actually seen really strong discretionary spending. And it's a signal to us that the U.S. consumer … is on solid footing, and they continue to spend in categories beyond the essentials.”’
In a conversation we had with the team at PwC, however, U.S. Consumer Markets Industry Leader Ali Furman said consumer confidence more akin to “A Tale of Two Cities.”
She explained: “You have the low-end consumers that are still really being squeezed, they're still coming off the inflationary period … And then the first two months of the calendar year saw higher inflation than anyone anticipated. So, those folks are struggling to make ends meet and to save.”
“And then you have the higher-end consumer," Furman added. "They're resilient. They're spending more than ever. The rich are getting richer.”
Her colleague Jeanelle Johnson, U.S. travel, transportation and hospitality leader, said “the luxury traveler is quite resilient,” noting that “people in households with incomes above $250,000 makes up 10 percent of the population [but] accounts for almost 50 percent of consumer spending”—up significantly from just 30 years ago.
PwC also shared the findings of its “2025 Global CEO Survey” in late January, which said that almost 60 percent of CEOs expect global growth to increase over the next 12 months.
All of this was shared knowing that President Donald Trump could initiate a trade war at any moment, but no tariffs had been officially levied when the comments were made. On Tuesday, however, President Trump hit Mexico and Canada with 25 percent tariffs and doubled the 10 percent tariff on China that he first introduced in early February.
Both Mexico and Canada plan to implement retaliatory tariffs on the U.S. and the stock market tumbled with the news.
What Could This Mean for Travel?
Johnson noted that this would likely have its biggest effect on the cost of construction.
“We could see a potential impact of tariffs on construction costs, which could slow down growth in terms of net-unit growth,” she said. “And if you are constructing new hotels and there's less supply, it'll be hard to meet the demand of the traveler.”
It could also affect the cost of linens, sheets and towels, which are often imported into the U.S. With less supply and higher costs of building and operating hotels, rates are very likely to increase.
The question, then, Johnson said: “What's the tolerance for rate increases by the traveler, when everything else could potentially be increasing, as well?”
This doesn’t even factor in the rising costs of other goods that consumers need to spend on. That said, Furman noted that she doesn’t expect companies to pass all of these costs onto the consumer.
“In 2018 (when President Trump in his first term placed tariffs on other countries), a primary strategy used to mitigate tariffs was pass on price to the consumer … but you cannot think about passing all of it on in today's market. It would be prohibitive to your volumes,” she said. “So, the point about how this could implicate discretionary spend, we know for a fact that retailers are being very thoughtful about how much of this they pass on because it's a tricky situation.”
Furman added, however, that “it will happen,” referring to costs being passed onto consumers. “We do think it will happen to some extent, and then it will probably have an implication to discretionary travel.”
One “positive” for the travel industry, despite rising costs, could be how Americans view travel.
Johnson noted, “Many people think that travel is a discretionary spend and, so, would rising prices elsewhere due to tariffs create more pressure on the ability to spend on discretionary travel?”
However, she went on to explain, “We've seen the consumer spending shift towards experiences, which portends well for travel. So, when we think about the impact on what is now truly what constitutes discretionary spend, if you think of experiences are no longer discretionary, [that] they're something you need for your mental well-being, then you incorporate that into your discretionary spend versus cutting out travel at the expense of other things.”
Shah of Chase Travel noted a similar view of travel in the eyes of the consumer. On the top trends Chase Travel is seeing, she said, “I don't know if it was ‘revenge travel,’ but to really get out there and folks really realizing this innate need for connection and exploration is really in our DNA.”
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