An unprecedented shift in consumer spending, despite inflationary pressures and in contrast to a declining consumer confidence trend, has been recorded among modern consumers in the US and Europe over the past two years. This trend makes forecasts for a number of different sectors difficult but opens up new prospects for others, such as tourism.
Such a trend would have been an unthinkable finding in the years before the pandemic. For decades, consumer sentiment and spending have danced in sync with the broader economic climate: when people felt uncertain about it, they cut back.
Back to today, with inflation rising, consumer confidence has plummeted and has yet to recover. But spending has not. According to McKinsey’s latest Consumer Wise survey of the U.S. market, even when we adjust spending for inflation, overall consumers are spending more than they did before the pandemic, but they are spending more since then and year after year.
In fact, although the survey shows that consumers feel somewhat more optimistic about the American economy compared to the previous year, their optimism remains at lower levels than in the pre-pandemic period, and more than half (53%) have either mixed feelings or are pessimistic about the state of the economy.
Consumer optimism has decreased
McKinsey also records the same picture in its corresponding report for the European market. In the third quarter, a complex psychological composition is observed among consumers: despite relatively positive developments (historically low unemployment rates in the eurozone at 6.3%, a small increase in inflation to 2% in October, and GDP growth of 0.4%) and despite stable incomes, consumer optimism has decreased.
The Q3 2024 survey on how Europeans assess the economic situation in the fourth quarter recorded the following…
-France: Despite moderate growth and inflation, consumers had the highest rates of pessimism since late 2022.
-Germany: Given low growth and high inflation relative to the eurozone in the fourth quarter, more consumers reported feeling pessimistic than optimistic, for the first time since late 2023.
-UK: There was a 9 percentage point increase in pessimistic consumers, likely due to their disappointment after a post-election surge in optimism in the summer.
However, as in the US, consumer confidence is not aligned with spending behavior, and fewer Europeans reported taking cost-saving measures, such as more careful monitoring of spending, compared to the previous quarter. Ironically, despite the positive conditions, other factors such as the national political situation and geopolitical tensions are weighing on the outlook for consumption. According to McKinsey research, these issues may be responsible for the weakening of the link between confidence and spending behavior this quarter.
What’s going on?
Why are consumers continuing to spend money, even though they remain pessimistic about the broader economic outlook? It seems that we have entered a new chapter in consumer behavior: the era of the “value now consumer”.
Apparently, to cope with their pessimism about the economy, consumers are improving their shopping choices, spending money in ways they believe will yield the most value, and attributing value to their purchases in new ways. They are not simply chasing low prices, but are getting the most bang for their buck, navigating between compromises and overspending, depending on the category. While they may be avoiding excessive spending, given their diminished optimism and concerns about prices, they seem to have the means to spend. And when they are truly inspired, they will not hesitate to buy.
Demand for hotels and flights in line with new consumer trends
In mid-2024, American consumers said they were going to spend less in most spending categories, but actual spending increased. In the third quarter of 2024, all spending categories either remained flat year-on-year or had increased spending, with spending on flights and hotels on the highest scale of increase, constituting the services with the largest deviation between intention and increase in actual consumption.
Europeans also reported in the third quarter of 2024 that in the next, fourth quarter, of the year they were going to make purchases of more expensive services than usual, with travel being the category with the third highest percentage of those intending to proceed with higher than normal spending (29%), after clothing purchases and dining services.
Therefore, tourism is one of the sectors with the most fertile ground for the establishment of new consumer behavior.
This fact adds an additional “unstable factor” for tourism since consumer sentiment is no longer a safe measure of how spending may move. However, in a period of challenges, such as the one we are going through, it can bear fruit that in other times of crisis would have been unthinkable for tourism, since, as reflected in the course of Greek tourism in the last two years, the demand for travel proves to be particularly resilient.
What does Greek tourism have to gain
Although no one can rule out the fluctuations that the new consumer trend may have, Greece as a tourist economy can count on its positive points. Geopolitical instability, economic challenges, climate change ,and concerns about overtourism, although they caused individual changes in travel behavior, did not manage to prevent Greek tourism from reaching almost 33.8 million tourists in the first 10 months of 2024, while pre-bookings for 2025 – with value now characteristics – are also progressing at a very positive pace, according to data presented by major tour operators.
A first indication for 2025, where the new consumer trend is expected to continue to dominate, arises from the planned airline seats for the winter, a period with which the range of the two McKinsey surveys coincides. The latest data from INSETE’s Airdata Tracker shows that the scheduled airline seats for the winter season 2024/2025 in our country, which always meet demand, show an increase of 16.4% from last year and stand at 5.6 million.
As shown by data from the aviation analysis company Cirium, direct flights from abroad to 8 major airports in Greece (Athens, Thessaloniki, Heraklion, Rhodes, Corfu, Kos, Mykonos, Santorini) show an increase of 6.7% in 2025 compared to 2024 and stand at 242,349 from 227,004 last year. In total, 15,345 new flights have been added to these airports.
Another component for a positive 2025 is the fact that large markets – with “value now” characteristics – continue to place Greece among the first choices of holiday destinations. According to the latest study by the Institute of the Association of Greek Tourism Enterprises (INSETE) – based on a survey conducted by the GWI company and concerning findings for the next 12 months – Greece remains in the same position in 2025 in the ranking of preferred destinations for Germans and French, in 3rd and 4th place respectively, while in the case of the British, it is also among the top 5, and specifically in 5th place, having however fallen by two places. These three countries, according to official data from the Bank of Greece, contributed 42% of the total receipts of incoming tourism to Greece in 2023.
RELATED TOPICS: Greece, Greek tourism news, Tourism in Greece, Greek islands, Hotels in Greece, Travel to Greece, Greek destinations, Greek travel market, Greek tourism statistics, Greek tourism report
