I read an interesting article on tax rebates and vacation spending. A lot of theories are floating around concerning the exact stimulative effect President Bush's $168 billion program will have on the ailing economy. If the article I read is correct, then the vacation industry may be a big beneficiary.
An expert on the tourism sector, economist Steve Morse of the University of Tennessee, suggests that timing is the key here. Since the rebate monies will be flowing at the same time as Americans start to plan and go on their vacations, Morse believes that economic activities related to enjoying time off will see a tangible boost. In fact, he further states that vacations are something that people might not necessarily deny themselves, even in times of recession. He points out that people might tend to take on a bit of debt to fund vacations since they see it as a "right of life," as he puts it.
I see the logic, especially the "right of life" issue. Not only are vacations important to everyone, but they are sort of comparable to toys at Christmas -- know how they say that people won't stop giving toys to their children even during hard times? Well, vacations are like toys for adults (and if the adults have children, as many do, then vacations are like toys for adults and children). And adults will not cease gifting themselves during the summertime.
So, which companies will benefit from this concept, assuming it proves itself to be accurate? Well, I'll go with the easy one first -- Disney (NYSE: DIS). But I'd also have to believe that retailers such as Target (NYSE: TGT), Wal-Mart (NYSE: WMT) and Best Buy (NYSE: BBY) will also be indirectly affected in a positive way.
If people use the rebates to get out on the road or fly to find some fun in the sun, they most likely will be in the mood to spend some bucks at stores like these in the vicinity of their destination of choice even once the checks are gone -- if there's one thing people like to do, it's buy things while on holiday. Maybe Junior will be treated to a new Nintendo DS card from GameStop (NYSE: GME) to celebrate his vacation -- that sort of thing.
This line of thinking intersects with Morse's findings that the 2001 rebates saw recipients spending beyond what they got from the government . In this way, rebate checks might act like gift cards, and we all know the stimulative effect of gift cards (yep, when I receive one, I oftentimes might spend more than what's loaded on it).
Obviously, we won't know how people will spend the rebates until they get them -- surveys and conjecture are all we have to go on right now. But I think Morse is onto something here. I mean, come on, the right of vacation is as American as apple pie -- get out there and enjoy yourselves, people! As for me, I might look for a stock or two to invest in...
Disclosure: I own shares of Disney; positions can change at any time.
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Reader Comments (Page 1 of 1)
4-07-2008 @ 3:42PM
alan patch said...
I bet some Orlando residents might blow that big incentive check on joy rides and cotton candy, but since the incentives are so...well, pathetic, I dont see a boom in recreation coming. If my personal stimulous package was as limp, I would never have been able to produce children.
I think your plan makes the best choice...oppourtunity to grow the pitiful donation into something more impressive is in every market.
Especially real estate...buy your children, each a house, with a swing set.