Experiences worth every penny

Key takeaways

  • Consumer preferences are shifting toward spending on experiences such as travel instead of material things like apparel and footwear—and companies that cater to this trend are likely to benefit.
  • Airlines, hotels and other businesses related to leisure travel are just some of the companies that stand to benefit from a strong job market and consumers' growing affinity for experiences.
  • The UBS Chief Investment Office's investment theme "Rewarding experiences (PDF, 307 KB)" focuses on companies with exposure to experience spending, including travel, eating out and gaming.

Consumers today want to spend their hard-earned cash on experiences, from enjoying time on the beach with loved ones to heading to a yoga retreat for a transcendent inner-journey.

Furthermore, many people are looking for experiences that leave a lasting impression long after they're over—whether that means learning how to cook a meal, taking a behind-the-scenes vineyard tour, or embarking on a home improvement project.

"Consumer preferences are shifting toward spending on experiences such as travel instead of material things," and companies that cater to this trend are likely to benefit, says Laura Kane, Head of Investment Themes Americas, UBS.

Kane is lead author of the UBS Chief Investment Office (CIO) report "Rewarding experiences (PDF, 307 KB)," which discusses CIO's investment theme focusing on companies with exposure to experience spending, including travel, eating out and gaming.

Experiences worth every penny

In 2016, the most recent year for which data is available, consumer spending on experiences eclipsed $1 trillion for the first time and now constitutes almost 13.5% of total discretionary personal expenditures, up from approximately 12% in 2011.1 At the same time, there's been a decline in certain kinds of retail purchases that might make consumers happier in the moment but that may lack the lasting effect of a memorable experience. Apparel and footwear, for example, have captured less wallet-share lately.

This shift toward experience spending will likely endure, driven in part by demographic tailwinds: Many millennials are looking for the added social currency that comes with posting pictures of unique experiences on social media. And baby boomers are seeking to enjoy new activities and travel in their retirement years. In fact, around 49% of baby boomers planned to travel in 2018, up from 38% the year before.2

Traveling the globe or staying at home

The strong job market and consumers' growing affinity for experiences should lead to more leisure travel, among other things. International tourist arrivals worldwide grew 7% in 2017, the highest rate in seven years, according to the United Nations' World Tourism Organization (UNWTO). And this growth is expected to continue, benefiting a variety of businesses, from airlines and aircraft manufacturers, to online travel agencies, hotels, theme parks and cruises.

Still, not all experiences have to take place outside the home. Consumers can also enjoy in-home experiences such as entertaining friends and family, Kane notes, and this is likely to help home improvement retailers as well as alcoholic beverage producers.

Whether it's traveling abroad or staying closer to home, people today are limited only by their own imaginations and how much they wish to spend.

Disclosures