The consumer life of American consumers is working hard for card companies right now.
American Express AXP -2.80%
Friday reported that spending on its travel and entertainment card nearly matched the 2019 pre-pandemic level in March. While large business travel expenses and international consumers are still not back at these levels, US consumers are not being held back by the state of the world these days and helped drive the recovery: In the first quarter, they spent 20% more on T&E, adjusted for exchange rate movements, than in the same quarter of 2019, AmEx reported.
Rising prices may squeeze people at the pump, but it does not yet appear to be a major deterrent to buying longer trips. US Bancorp reported earlier this month that their flight card spending volume was flat in March 2022 compared to 2019, the first time the bank had seen a recovery to prepandemic levels. Bank of America said card spending on petrol rose 42% year-on-year in the first quarter – only second only to a 57% increase in travel and entertainment.
AmEx’s results indicate that it is not only higher prices that drive higher volumes, but the pace of activity. The number of travel bookings for US consumers increased by almost 50% compared to 2019. AmEx also noted that some of the increase is driven by a return to hotel and restaurant purchases at higher prices. The company’s Resy restaurant booking service had one of its busiest months ever in March, with reservations rising 16% from February.
It may be that once the itching after traveling and going out again is itchy, consumers will have to start spending more cautiously to prepare for inflation or for fear of the economy more broadly. But much of the momentum comes from key categories that could be more resilient.
At AmEx, Millennial and Gen-Z, total consumer 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 some faith in one’s financial sustainability to be willing to pay to access future card benefits. The younger group tends to use card fringe benefits more often: AmEx, for example, has noticed that Millennials and Gen-Z card members use $ 200 hotel credit benefits twice as often as other age groups.
Business travel is also still in recovery mode. It tends to be less price sensitive and generally has much larger purchase sizes. If Zoom fatigue continues to increase corporate conference or travel plans, it may help keep volume up, even if consumers fade a bit. Across all customer types, which include large global companies, T & E billing for AmEx ran at 75% of 2019 levels in January, when the Covid-19 Omicron variant influenced decisions – in March it was at 99%.
Investors have certainly noticed momentum, with American Express shares rising more than 12% so far in 2022, and other card companies’ shares such as Capital One Financial and Discover Financial Services falling far less than banks in general. The results for the first quarter so far show that consumer consumption so far still has momentum.
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