Saving Those Pennies for Annual Vacation Heaven

You have to give those diamond merchants credit. They have an absolutely unnecessary product to sell (a bit like travel), yet they boldly stand behind the idea that every young bridegroom should spend two months of his hard-earned salary on an engagement ring.

Some of us may think it’s profoundly unwise to spend 17% of our annual income on a shiny pebble, but it hardly matters: Those diamond dealers have spent so much on shadows-and-violins advertisements that the idea lives in popular consciousness.

The travel business, for all its savvy salespeople, has yet to produce any parallel to the diamond trade’s two-month rule; nor have consumer advocates waded in with prescriptions. What to spend on a vacation, and how to scrape up that sum, are riddles each traveler faces (although spouses can usually be relied on for hints).

What’s reasonable? In the 1870s, notes author Cindy Aron in her 1999 history of the American vacation, “Working at Play,” the middle-class New Yorkers who spent their summers in Mohonk on the Hudson River “apparently were used to finding places in the $10 to $15 per week range.”

How much have things changed? I have some numbers and theories. But I’d also like to hear from readers on this question. By e-mail or old-fashioned mail (addresses at the end of the column), tell me three things: What percentage of your household income did you spend on your costliest vacation in the last year? How many months did (or will) it take to save for or pay off that trip? Finally, if you were advising someone on vacation spending, what percentage of household income would you suggest?

Judging from some surveys, you could make a case for $141 per household per day of vacation. In an April poll of Americans’ vacation habits, the Travel Industry Assn. of America (TIA) found that the average respondent expected to spend 8.3 days and $1,172 per household on his or her most expensive trip this summer. That’s less time but more money than a comparable survey from a year earlier. (The 2000 numbers were 10.1 nights and $965. TIA spokeswoman Cathy Keefe said both sets of figures came from a random phone survey of 1,300 residences nationwide.)

You could also make a case for spending 2% of your household income. Terry Thornton, vice president for marketing and planning at Carnival Cruise Lines, notes that the average household income of a Carnival passenger is $60,000 per year and the average Carnival vacation (a three-to seven-day cruise) costs $600 per person. In other words, among his customers, a typical couple spend $1,200, or 2% of their $60,000 annual income, on their biggest trip of the year.

One nonprofit consumer-credit counseling organization, https://myvesta.org in Rockville, Md., offers a vacation planning guide on its Web site, urging families to begin saving a year ahead and to hold a garage sale to raise “seed money.”

The group also cites AAA studies suggesting that a family of four should expect to spend $224 daily for food, lodging and transport on driving trips.

Certainly, different destinations inspire travelers with different ideas about spending. The San Francisco Convention & Visitors Bureau conducted a survey in 1995, polling 3,000 tourists who came from at least 100 miles away.

The bureau’s researchers found that those visitors, whose median household income was $65,900, were spending an average of $130.40 per person per day. But these Bay Area visitors weren’t all spending their own money. About 44% were on vacation, but 30% were in town for a convention or meeting and 25% were there for other business purposes.

When California state tourism officials rounded up information for 1999, they found that most tourists in California (167 million of 197 million visits of one night or more) were visiting from elsewhere in California.

Those vacationing Californians, whose average household income was $59,600, spent an average of $70 per person per day. Visitors from out of state spent slightly more.

How do we save that money? Some families keep savings accounts earmarked for vacation funds. Some put extra cash in an envelope and file it away in a den cabinet with their passports. (That was my method for a while, until my credit-card dependence deepened and I got wary of leaving cash around the house.) And many families just pull out credit cards.

It was that buy-now, pay-later traveler who inspired Pleasant Holidays, a Westlake Village-based packager of tours to Hawaii, Mexico and the South Pacific, to offer an installment plan in 1993. (Spokesman Les Gargan said the program is used by 3% to 5% of the company’s customers and includes financing at 19.8% for 18 months.) In 1997, Princess Cruises stepped up with “Love Boat Loans” (offering payment plans of up to four years, with interest rates of 14.99% to 26.99%).

And now comes Carnival, the largest cruise company in the U.S. On April 11, Carnival unveiled a Fun Finance Plan. For as little as $14 per month (for 24 months), consumers can buy a three-day Los Angeles-Ensenada, Mexico-Los Angeles cruise (regular price: $299), which comes with a Carnival-branded MasterCard. Carnival has partnered with finance company Capital One on this offer. Interest rates on Carnival’s installment vacations vary from 9.9% to 19.9%, depending on individual credit histories. Eventually, Thornton said, Carnival hopes that 10% to 15% of its passengers will use the payment plan.

Consumer credit experts say that if you don’t buy your vacation with money in hand, you can build vast debt quickly. Even paying bills as prescribed, a consumer may be surprised to see just how much a vacation can actually cost: If you take a $5,000 cruise and pay it back over four years at 20% interest, your total outlay is $7,300.

The travel industry is hardly a pioneer in tempting consumers with these offers. In fact, you could argue that travel companies are latecomers to this approach.

“Virtually every other discretionary purchase can be made via monthly installments,” notes Carnival spokeswoman Jennifer de la Cruz. “Most of us have gone to the jewelry store or the appliance store ... and made a discretionary purchase to be paid in installments. In fact, that’s how I got the big, fat 10th anniversary ring I’m wearing.”

Chalk up another one for those diamond people.

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Christopher Reynolds welcomes suggestions, but he cannot respond individually to letters and telephone calls. Address your comments to Travel Insider, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012 or send him e-mail to chris.reynolds@latimes.com.