Discretionary Spending

2023 was a big year for experiences. People flocked to movie theaters to watch Barbenheimer. They flocked to stadiums (and movie theaters) for Beyonce’s and Taylor Swift’s concerts, adding an estimated $8.5bn to the US economy. An extraordinary year indeed, but also one that highlights a shift to wanting experiences, rather than physical items. While Covid lockdowns confined people to their homes and led to a spike in purchases of durable and non-durable goods, reopening after months of restrictions meant people had a renewed outlook on getting out and doing things, including venturing to venues with thousands of other people. But Covid didn’t suddenly cause everyone to forego their home exercise equipment in favor of group fitness, it just highlighted the trend. See chart below.

There are likely a number of reasons for this shift in behavior, including a desire to forge meaningful relationships at a time when many of us spend nearly every waking hour in front of a screen. Another major reason, unsurprisingly, is social media. Experiences provide unique and visually compelling material for social media platforms, allowing influencers and non-influencers alike to showcase their lifestyle, personality, and interests. Also, as material goods may have diminishing returns and all that stuff may eventually be relegated to a storage unit, experiences mean a lifetime of memories, ideally shared with loved ones.

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From an investment perspective, this means that there has been an upswing in demand for travel and activities. Sites like Viator have taken off as travelers want curated experiences to make the most of their adventures. It also means a shift in revenue for traditional retailers, which have also been recently impacted by supply shocks and inflation. Considering “the consumer” is at the core of Somar’s analysis, this is an area we have been following since the firm was founded 8 years ago, and one that we are deeply interested in.

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On a personal note, as my eldest daughter begins preparing for her final year of high school, my mission is to expose her to new places and send her off with fond memories of her family travels. After all, as a young adult, she may want to venture off with newfound friends and not her old dad. But for now, at least I can give the gift of new experiences that she can hold on to long after her latest phone becomes obsolete. Like the time we were stuck waiting for a rental car in Hawaii for 3 hours after an 11-hour flight and had to fight jetlag and manage a restless toddler. But it was well worth it.