Who wins in the 'staycation' world?

By Michael Brush

It's almost the Fourth of July! Pack your bags and get in the car, kids. We're off to . . . Wal-Mart?

Sadly, with high gasoline prices and rising unemployment, it's come to this.

Lots of Americans are making the best of it at home this summer because it's simply too expensive to travel.

It's a trend so widespread retailers even have a name for it: the "staycation," when you stay at home for your vacation.

Don't think this is just another ploy by retailers to "share your pain" so they get you in the door. There's lots of hard data to show the trend is for real.

"Given how energy prices are boosting the cost of a vacation, it's getting mighty expensive to go and enjoy yourself, especially if you are worrying about your financial well-being," says economist Ed Yardeni of Yardeni Research.

The bright side, such as it is, is that there's an angle for investors. Retailers with the right prices on stuff you'll need to entertain yourself at home -- such as Wal-Mart Stores (WMT, news, msgs) and Amazon.com (AMZN, news, msgs) -- will benefit. So should companies like Marvel Entertainment (MVL, news, msgs) and Walt Disney (DIS, news, msgs), which make the movies Americans are likely to go to see because they're home instead of traveling. (We are seeing a big movie summer already, as predicted my April 9 column.)

I wouldn't buy the stock of any company solely as a staycation play. Instead, I'd carefully choose the companies that have other things going for them, such as impressive outperformance already in these hard times or the advantage of having competitors who are in trouble. That way, they'll survive right now and thrive when the economic cloud finally lifts.

Besides retail, I'd look at names such as Great Wolf Resorts (WOLF, news, msgs), a national water-park chain whose stock has been hammered but will likely rise again.

Before we look closely at the stocks, here's a little evidence that shows the trend is for real.

Hard numbers about hard times

"The whole gas price thing is starting to affect everybody, whatever incomes people have," says Pam Goodfellow, a consumer-sector analyst at BIGresearch, a Worthington, Ohio, shop that does consumer studies for national retail chains. "Spending patterns in general are showing us that everybody is trying to cut back on anything they can."

When it comes to vacations, people are looking to trim their budgets without going into hibernation. "With staycations, you can feel good about not dropping several thousand dollars on a vacation," Goodfellow says.

Consider these numbers:

• Just more than 83% of Americans recently surveyed by BIGresearch said they would save instead of splurge on vacation travel this summer.

• A little more than 44% said they would cut back on travel because of higher gas prices, compared with 33% last year.

• Americans drove an estimated 1.4 billion fewer miles in April, for a decline of 1.8% from the same month in 2007. That followed a 4.3% decline in March, according to the U.S. Department of Transportation. April, the latest month for which numbers are available, was the sixth month of decline in road trips.

• The Air Transport Association predicts that 1.3% fewer people in the U.S. will fly between June 1 and the end of August -- 211.5 million people compared with 214.2 million last year. That may sound like a small change, but it's a reversal from steady increases in air travel since the 9/11 attacks. Air travel was up 4.8% last summer and had grown 21% from 2002 through 2006.

• AAA last week predicted 1.3% fewer Americans would travel this Fourth of July than last year. It expects car travel to decline 1.2% and air travel to be off 2.3%.

Courting the nesters

Retailers have been quick to pick up on the trend.

Circuit City (CC, news, msgs) is telling shoppers to invest in technology that will make your life better. It suggests stuff such as robotic vacuums, a blender to whip up smoothies, an outdoor sound system or a big-screen TV. It even tells shoppers to buy metal detectors to hunt for treasure at the beach. Wow -- have things really gotten that desperate?

Wal-Mart believes staycations are for real. So it is rolling back prices on products it thinks will be in high demand as a result, says Melissa O'Brien, a spokeswoman for the giant retailer.

"People still want to have fun, but they may be doing that more within the home," she says. To capture staycation spending, Wal-Mart offers extra-large discounts on products such as hot dogs, hamburgers and barbecue sauce, coolers, patio sets, big-screen TVs and backyard pools for the kids.

Continued: Staycation theme

 1 | 2 | next >