- Recent figures show that restaurant sales are slowly recovering from the pandemic.
- This could create an opportunity for issuers to roll out dining-related rewards to boost spending and recoup pandemic-related losses.
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Coronavirus-mandated stay-at-home measures and dining closures led to significant losses for US restaurants, but recent figures from NPD Group indicate that those declines are slowing. Restaurant revenues only fell 9% annually in August, an improvement from the average 78% sales decline reported in the first week of April at the pandemic's height.
Following the peak, on-premise restaurant visits improved monthly leading into the summer as coronavirus cases decreased and restrictions lifted. And with New York City making outdoor dining permanent year-round, other major US cities may follow suit, which could continue to increase the overall financial outlook for restaurants.
An improvement in dining sales could give a much-needed boost to credit card issuers—if they can incentivize spending. The travel and entertainment (T&E) category—which includes dining—took a substantial hit as consumers temporarily ceased dining out during the pandemic. For example, Amex's global consumer billed business declined 20% year-over-year (YoY) in Q2, mostly led by its T&E category, which fell almost 100% YoY in April.
And although some issuers are offering financial support to keep customers, overall credit card spending remains low. However, now that restaurant sales are beginning to recover, issuers may have a chance to recoup some losses if consumers decide to turn to credit cards for dining payments. But issuers will need to provide incentives to appeal to consumers who may still be wary of debt accrual as the pandemic continues.
Issuers could leverage dining rewards to encourage credit card spending and lift the T&E category.
- Consumers have become more interested in card rewards during the pandemic. With many consumers becoming financially strained during the crisis, credit card rewards have become more appealing because they allow consumers to save on their purchases. Before the pandemic, nearly 31% of US cardholders didn't redeem rewards, with nearly half of consumers saying they didn't know how many points they had. But that's changed: About two-thirds of US cardholders now think rewards points are as valuable as cash. Card issuers could roll out dining-specific rewards to appeal to consumers and boost overall credit card spending.
- And with continuing uncertainty around air travel, consumers may be more interested in dining-focused rewards, helping issuers boost T&E spend. With international air travel restrictions still in place for many countries, including the US, airline miles may not be useful for many consumers, which could further damage the T&E sector. However, if issuers roll out dining rewards that appeal to consumers, there might be a boost in card spending that could help make up for some of the losses in the T&E category.
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