The insight: The fourth quarter is shaping up to be a strong season for travel companies catering to affluent consumers—but an uncertain one for everyone else.

The bulls: From the perspective of the Big Four airlines—American, Southwest, Delta, and United—holiday demand looks strong.

• Southwest expects quarterly operating revenues to reach an all-time high in Q4, following a record Q3 performance.
• Delta and United both forecast record-breaking profits for the final quarter of the year, aided by strong spending on premium seats and international trips.
• Even American Airlines, which has struggled relative to peers after a misstep away from corporate travel, gave Q4 guidance ahead of expectations—also citing accelerating premium demand.

The bears: While airlines see a clear runway for growth, hotel operators are warning of weakness.

• US demand for Hilton’s hotel rooms softened in Q3 due partly to weaker inbound and government-related travel, which drove revenues per available room (RevPAR) down 2.3% YoY.
• Holiday Inn operator InterContinental Hotels Group (IHG) also reported a decline in US RevPAR for the three months ended September 30, as leisure demand slowed and occupancy rates fell.
• Wyndham lowered its FY forecast after revenues fell more than expected in Q3, again driven by weakness in the US market. RevPAR fell 5% YoY, while both occupancy and the average amount spent on rooms also declined.

The big picture: The diverging outlooks of the airline and hotel industries reflect broader patterns in US consumer spending, as well as the ongoing fallout from US trade policies. A K-shaped economy is boosting companies that cater to more affluent customer bases—like Delta and United—while hurting those that cater to low- and middle-income consumers (like Spirit and Frontier).

That explains why Delta, United, American, and Southwest remain optimistic about their holiday fortunes even as overall demand for travel declines.

• Roughly 1 in 5 US adults plan to fly or stay in a hotel or short-term rental during Thanksgiving or the December holidays, down from 27% in 2024, per a Bankrate survey.
• Demand is softening across generations—most notably among Gen Zers and millennials, who are normally eager to indulge their wanderlust. Just 30% of Gen Z adults plan to travel this holiday season, down from 44% last year, in the latest sign that a tougher labor market and higher costs are straining the cohort’s finances.
• But that pullback doesn’t extend to higher-income consumers. American Express customers spent 14% more YoY on premium airfare in Q3, while quarterly bookings on the company’s travel platform reached a record high.

Our take: While affluent consumers are driving travel spending, much of that money is being spent on international trips. That’s small consolation for the many retailers and restaurants that are counting on domestic demand to make up for declining inbound tourism.

The government shutdown is adding further pain. The travel industry has already lost nearly $3 billion due to air and rail disruptions, attraction closures, and limited access to national parks, per the US Travel Association. The longer it continues, the more likely would-be travelers are to cancel their trips, making an already challenging holiday season even tougher for businesses.