Travel Tops Wish Lists, But Physical Gifts Win the Wallet, Visa Finds

Only 15% of U.S. consumers plan to prioritize spending on experiences for others this holiday season, even though more than half put travel and live events at the top of their wish lists, according to a Visa survey published Thursday. Physical gifts still win the money: 27% of respondents said they'll favor physical goods over experiences.

The gap between what shoppers want and what they'll actually buy comes down to higher travel costs, weaker consumer sentiment and a renewed emphasis on value, said Michael Brown, Visa's principal U.S. economist.

"There is some interesting trade-offs there that we're seeing on the part of consumers," Brown told CNBC. "If I'm traveling more, I'm probably going to be gifting those physical goods less, so this is really the broader context."

Visa conducted the survey among roughly 4,660 U.S. adults ages 18 and older, designed to be representative of the broader consumer population.

Why aren't travelers booking the trips they want?

Budget pressure is doing much of the work. Brown said Visa expects more people to celebrate the holidays "a little bit closer to home" than in the past, citing rising airfares and general inflation. In September, consumer prices rose 3.7% annually, driven by surging energy costs.

Airlines have hiked ticket prices this year as fuel costs climbed by billions of dollars due to the war in the Middle East. Fares were up more than 22% in September compared with a year earlier, according to the consumer price index. Even if fuel prices drop, airline executives have said fares are likely to stay high.

Those trends are pushing consumers to be more intentional about where they spend, as inflation lifts prices across the board.

"Consumers are aspirational. They want those experiences, they want to travel, they want to be out in the world," Brown said. "However, the economic reality is with prices rising, with economic uncertainty, they need to balance the reality of today's economic environment with those aspirations."

Who is still spending on travel?

The income split is stark. Only households earning above $200,000 spent more on trips departing between Nov. 1 and early next year compared with the prior year, the report found. Most other income groups pulled back on travel spending.

"If you think about that segment, a lot of them own equities, and the equity market runup over the last several months has created a lot of positivity among that specific affluent demographic, and I think that's one of the factors that continues to motivate even aggregate macro spend today," Brown said.

Less affluent shoppers are trading down instead. Visa's consumer survey from October showed roughly one-third of consumers with income below $100,000 will switch to lower-cost brands or stores when buying holiday gifts this season.

What does this mean for holiday sales forecasts?

Visa projects a 4.5% year-over-year increase in holiday sales growth, but inflation accounts for most of it. Stripping out price increases, sales are expected to rise just 1.1% this year — down from a 1.3% real increase during the prior holiday season.

Brown said the findings may still be encouraging for the broader retail sector. With less emphasis on travel and more projected spending on physical gifts, the shift could boost retailers at a moment when spending is under pressure.

There's a caveat, though. Consumers may simply expect to spend more because they've grown accustomed to higher prices, not because they're buying more.

"But, of course, consumers are internalizing higher prices of things, and I think that's why they're reporting higher anticipated spend this year," Brown said. "I think these numbers just need to be looked at through the lens of the inflation and particularly consumers' perception of where inflation is going to go. I think that weighed heavily on consumer psychology this season."

For retailers, the takeaway is straightforward: the gift aisle, not the departure gate, is where the marginal holiday dollar will land this year.