Early Indicators Point to Increased Summer Travel in 2005 with Americans Capitalizing on Lower Airline and Rental Costs, According to Visa USA

"Increased spending on cards for travel suggests consumers are feeling confident about the economy, and are taking time off to enjoy vacations with their families and friends," said Wayne Best, senior vice president of Business and Economic Analysis for Visa USA. "After 9/11, Americans understandably stayed close to home, spending their money on consumer and household goods such as cars, flat-panel televisions and home furnishings. Now, with the growing economy and greater job stability, there appears to be strong momentum shifting back to travel."

There are more than 463 million Visa branded credit and debit cards in the United States. Those cards represent over 14 percent of Personal Consumption Expenditures (PCE), indicating that consumers spend more than $14 out of every $100 using a Visa branded card. Only cash and checks have a greater share of PCE, making Visa products a strong indicator of consumer spending behavior. SpendTrak provides a real-time snapshot of consumer trends.

Savvy Spenders Spur Sales

Although Americans have returned to vacationing, today's consumer continues to hunt for good deals, a trend that is reflected in lower average ticket prices for airline and auto rental purchases. Throughout the year, airlines have experienced strong sales, with Visa card volume growth of 11 percent. However, intense competition has caused the average individual transaction for both airline tickets and car rentals to decline approximately 3 to 7 percent across the board (see tables below).

"Lower airline and car rental prices are spurring many Americans to take vacations despite increases in interest rates and higher energy prices," said Best. "Consumers are benefiting from the competition taking place within the airline and car rental industries, allowing them to travel more frequently or take extended vacations with the extra savings."

In contrast, consumers have been willing to pay more for lodging. The average lodging ticket has increased almost 4 percent since 2005, to $195.76. Other related summer recreation categories also are seeing heightened activity. Strong volume growth in the sports and recreation and amusement park categories in 2005 (increases of 14 and 13 percent, respectively) also indicate a busy summer season.

Additionally, dining out continues to be one of America's favorite pastimes, with dining volume on Visa payment cards increasing approximately 21 percent in 2005. Within this category, the average ticket price has dropped from $27.01 to $24.36 - a decrease of almost 10 percent. This shift is in large part due to increased acceptance of cards for smaller ticket dining items. The quick service restaurant category in particular grew $3.5 billion in volume, a 59.3 percent increase over the same period a year ago.

Energy prices are expected to decline after the peak summer driving season, giving consumers more room in their budgets for spending on discretionary items. It is likely that consumers will continue to spend on travel and entertainment, home and garden goods, and at both specialty retail and discount stores - all further indications that consumers are feeling increasingly confident and savvy about their finances. The significant increase in discount store volume in particular, close to 30 percent in 2005, supports the consumer desire for smarter spending.

The Months Ahead

What else can consumers and businesses expect from the economy in the coming months?

"Travel from overseas to the United States will continue to improve as the dollar softens to the euro and yen," said Best. "This is great news for American businesses and cities that rely on tourism."

Best concludes, "The bottom line is that business balance sheets are the strongest in decades, which means a greatly improved job market with more Americans back at work. Homeownership is more than 69 percent - its highest level in U.S. history - and given high appreciation rates, many consumers have gained an asset that gives them more buying power. These factors provide consumers with more discretionary income, which they are spending on the 'extras' such as vacations, home products and dining out."

Travel and entertainment spending represents approximately 17 percent of Visa's overall volume. The increase in spending on Visa credit, debit and prepaid cards indicates that consumers are migrating in large numbers from paper forms of payments such as cash and checks, to electronic payments. Visa cards are one of the most accepted, convenient and secure forms of payment, especially while traveling. Visa cards provide travel protection and favorable exchange rates, and are an easy tool for management of daily expenditures.

SpendTrak Data

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                  Average T&E Volume - 2005 vs. 2004

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                   Category                        % Visa Volume

                                                   Change vs. 2004

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                   Airlines                             +11%

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                  Car Rental                             +9%

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                    Dining                              +21%

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                    Lodging                              +9%

             Sports and Recreation                      +14%

                Amusement Parks                         +13%

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                Average Retail Volume - 2005 vs. 2004

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                   Category                        % Visa Volume

                                                   Change vs. 2004

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               Home Furnishings                        +13.0%

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                Discount Stores                        +28.2%

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               Specialty Retail                        +13.7%

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                    Average Ticket - 2005 vs. 2004

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      Category        Average Ticket Average Ticket  % Visa Avg Ticket

                           2005           2004        Change vs. 2004

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      Airlines           $285.52        $306.66            -6.9%

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     Car Rental          $186.11        $192.55            -3.3%

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       Dining            $24.36          $27.01            -9.8%

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       Lodging           $195.76        $188.57            +3.8%

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