PEJ - The Leisure Party Continues For Now

2023-06-30 01:30:00 ET

Summary

• On beaches, cruise ships, gaming floors, theme park midways, and golf courses across the U.S., activity remains robust and, in many cases, well above pre-COVID levels.
• Leisure management teams remain highly optimistic with respect to demand.
• The average cruise line passenger, golfer, or gambler likely skews toward higher income, potentially explaining some of the economic resilience observed to date.

By Ken Beierlein

While investors remain on high alert for signs of a consumer slowdown, demand for most leisure pursuits has thus far proven resilient.

If economic conditions are deteriorating in the face of inflation and tightening monetary policy, no one has told the leisure consumer. On beaches, cruise ships, gaming floors, theme park midways, and golf courses across the U.S., activity remains robust and, in many cases, well above pre-COVID levels.

Take Las Vegas. During April 2023, the total Las Vegas Strip "win" (the amount retained by the casino) was 30% above the same month in 2019 and almost exactly in line with the average over the preceding 12 months. ¹ On the nation's golf courses, year-to-date rounds played through April 2023 grew 3.1%, after having already grown 15.7% collectively from 2020 to 2022. ²

Even cruises are now getting in on the action. After a somewhat bumpy "reopening" during 2021 and 2022, operators lifted virtually all COVID protocols late in 2022, somewhat later than other types of leisure businesses. Now, operators are seeing bookings that far exceed 2019 levels, at higher pricing despite industry capacity that has grown in the high single digits since 2019.

Across the board, leisure management teams remain highly optimistic with respect to demand, with many citing sustainable secular trends - hybrid work, increased preference for experiences, and "bleisure" travel (combining business trips with leisure) among them - as continuing to drive demand even as stimulus and pent-up pandemic savings wane. Management teams have seen virtually no weakness in the consumer thus far, with some claiming that even the failure of Silicon Valley Bank had no identifiable impact on spending.

These trends stand in contrast to some businesses in the "goods" economy that have recently missed earnings estimates or provided weak guidance. While such results suggest consumers may be cutting back in some places, they also seem to be prioritizing leisure pursuits post-COVID, many of which may have been on hold or limited over the past several years (particularly cruises). In addition, the average cruise line passenger, golfer, or gambler likely skews toward higher income, potentially explaining some of the economic resilience observed to date.

While we remain vigilant to identify any negative inflections in the data, for now, leisure remains a safe harbor during a period of broader volatility. The party (on the ship, in the casino, or on the course) continues.

¹ Las Vegas Visitor and Convention Authority, as of April 2023

² Golf DataTech as of April 2023

This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice. This material is general in nature and is not directed to any category of investors and should not be regarded as individualized, a recommendation, investment advice or a suggestion to engage in or refrain from any investment-related course of action. Investment decisions and the appropriateness of this material should be made based on an investor's individual objectives and circumstances and in consultation with his or her advisors. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice. The firm, its employees and advisory accounts may hold positions of any companies discussed. Any views or opinions expressed may not reflect those of the firm as a whole. Neuberger Berman products and services may not be available in all jurisdictions or to all client types. This material may include estimates, outlooks, projections and other "forward-looking statements." Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed.

Investing entails risks, including possible loss of principal. Investments in hedge funds and private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in hedge funds and private equity are intended for sophisticated investors only. Indexes are unmanaged and are not available for direct investment. Past performance is no guarantee of future results.

This material is being issued on a limited basis through various global subsidiaries and affiliates of Neuberger Berman Group LLC. Please visit www.nb.com/disclosure-global-communications for the specific entities and jurisdictional limitations and restrictions.

The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman Group LLC.

© 2009-2023 Neuberger Berman Group LLC. All rights reserved.

Original Post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

For further details see: