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Can Airbnb redefine travel again? · The Financial Exchange Show

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Speaker 2: the moment, anything else catching your eye, Michael.
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Speaker 3: Not particularly relatively calm upfloat in markets today.
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Speaker 2: So let's talk a little bit about what we are
2:19
Speaker 2: seeing in the travel industry. We got a couple different
2:23
Speaker 2: pieces discussing this. The first one from the Wall Street
2:28
Speaker 2: Journal talking about airlines and basically saying, Hey, things are
2:33
Speaker 2: not great in airline world right now. You've got a
2:36
Speaker 2: whole bunch of, you know, different things potentially impacting it.
2:41
Speaker 2: But overall, what we're seeing is airlines are cutting capacities
2:44
Speaker 2: in the second half of the year to try to manage,
2:47
Speaker 2: you know, how full their planes are. And that's not
2:51
Speaker 2: something that you normally see outside of recessionary environments. It's
2:55
Speaker 2: it's just really unusual, quite honestly, And I think what
3:00
Speaker 2: we're seeing here is that a couple of airlines are
3:03
Speaker 2: doing well. Everyone else is kind of just uttering around,
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Speaker 2: and basically, if you're not Delta or United, you're having
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Speaker 2: a tough time dealing with this environment right now.
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Speaker 3: Is this more of the same from what we've been
3:16
Speaker 3: seeing in terms of just consumer trends right Like, Yeah,
3:19
Speaker 3: there's a good half of the American public that are
3:22
Speaker 3: struggling a bit with the state of the economy right now.
3:25
Speaker 3: But if you're United in or Delta and have a
3:29
Speaker 3: vast international setup, substantial first class cabins. Then you're holding
3:37
Speaker 3: onto this just vine. It seems to me that this
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Speaker 3: is a bit of a domestic airline issue that seems
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Speaker 3: to be drying up a bit.
3:44
Speaker 2: Yeah, well, I think it's very much. You know, the
3:47
Speaker 2: story is it's the opposite of the early two thousands,
3:51
Speaker 2: where in the early two thousands, the discount carriers were
3:54
Speaker 2: eating everyone else's lunch. You know, Southwest, you know, was
3:59
Speaker 2: expand and growing and just you know, taking market share.
4:03
Speaker 2: Jet Blue is doing the same thing, same with Frontier
4:05
Speaker 2: and Spirit and the legacy carriers, which again you've got
4:09
Speaker 2: Delta American United. At the time, you still had Northwest
4:14
Speaker 2: floating out there, you still had US Air out there.
4:17
Speaker 2: A lot of those mergers happened because the big legacy
4:19
Speaker 2: airlines couldn't be profitable fighting off these these upstarts at
4:23
Speaker 2: the scale they were at, and so you ended up
4:25
Speaker 2: with all this consolidation and a number of bankruptcies happening
4:28
Speaker 2: in the early two thousands as well, And so it
4:33
Speaker 2: was kind of a time that was not great to
4:35
Speaker 2: be a legacy airline. And instead, what you're seeing right
4:38
Speaker 2: now is because the place that Delta is not just Delta,
4:44
Speaker 2: but Delta United in particular among domestic airlines. The place
4:48
Speaker 2: that they're seeing the biggest growth is among people who
4:51
Speaker 2: are willing to pay the extra money for the luxury seats,
4:56
Speaker 2: particularly on international flights, but also long haul domestic. They've
4:59
Speaker 2: been put in these on there. If you're flying, you know,
5:01
Speaker 2: Boston to San Francisco, Boston to Lax, you know those
5:05
Speaker 2: types of routes JFK to LAX. You know those types
5:09
Speaker 2: of things. You've got, you know, plenty of these, you know, expanded,
5:12
Speaker 2: you know, what would typically be your kind of international
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Speaker 2: first class setups where you know, you got the seats
5:18
Speaker 2: that lay, you know, flatten this and that and and
5:21
Speaker 2: you're finding that the companies that are offering those products
5:24
Speaker 2: are able to find takers for them, and the margins
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Speaker 2: on those are way better than trying to sell seats
5:28
Speaker 2: for two hundred and fifty bucks a pop to people
5:30
Speaker 2: flying six hours across the country.
5:32
Speaker 3: And even the airlines that don't have that offering are
5:35
Speaker 3: trying to find something along those lines, like what can
5:38
Speaker 3: we offer as a buy up, as a as a
5:41
Speaker 3: upgrade in some way, shape or form, even if it's
5:43
Speaker 3: just slightly more leg room or some sort of meal
5:46
Speaker 3: package that we are going to sell because people are
5:48
Speaker 3: apparently bidding up for that right now. That is that
5:52
Speaker 3: seems to be the crux of the changes going on
5:55
Speaker 3: at Southwest. Who's going to start charging for bags? I
5:57
Speaker 3: believe this later this month, They're they're going to be
6:02
Speaker 3: changing their reservation status. So it's you know, actually booking
6:06
Speaker 3: seats and you know, frankly just trying to look more
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Speaker 3: like these airlines.
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Speaker 2: Part of me wants to.
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Speaker 3: Say that that's you know, you're you're shifting right as
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Speaker 3: we're peaking in terms of this type of travel demand.
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Speaker 2: But I don't.
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Speaker 3: I don't know, like this type of trend that we're
6:24
Speaker 3: seeing right now could play out for quite some time
6:28
Speaker 3: until really until the economy kind of breaks and you
6:33
Speaker 3: once again have that search for value which is just
6:36
Speaker 3: not being not being looked at right now.
6:38
Speaker 2: Yeah, I mean, you think about the people that are
6:41
Speaker 2: think about that that premium ticket and who's paying for it,
6:44
Speaker 2: and I generally come up with three groups businesses, wealthy,
6:51
Speaker 2: you know, people who are working, you know, high income earners,
6:54
Speaker 2: and wealthy baby boomers who were retired and want to travel. Yeah,
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Speaker 2: like those are my three groups that I generally get to.
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Speaker 3: So generally wealthy business is sending their employees and baby
7:07
Speaker 3: boomers who are splurging on that ticket that they you know,
7:10
Speaker 3: they just want the extra comfort in their slightly older
7:13
Speaker 3: age and our willing to splurge.
7:14
Speaker 2: And I guess I look at it, and you know,
7:16
Speaker 2: the business travel will come and go. But those cycles,
7:19
Speaker 2: you know, play out over the course of three or
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Speaker 2: four quarters. You know, they're relatively quick. The shift, you
7:27
Speaker 2: know that you see when you're talking about high income earners,
7:30
Speaker 2: that might be a little longer, just because unemployment can
7:32
Speaker 2: act with a little bit more of a lag on
7:33
Speaker 2: a business cycle, So that can play out over a
7:35
Speaker 2: few years. When it comes to wealthy retirees and the
7:40
Speaker 2: growing numbers of them, I'm not saying that that's like
7:44
Speaker 2: a recession proof area because it's not. But I think
7:48
Speaker 2: there's less wiggle there than in other places, and that's
7:51
Speaker 2: an increasingly large portion of our society today.
7:54
Speaker 3: Yeah.
7:56
Speaker 2: Now, obviously here's the caveat. Look, if market's going the
7:59
Speaker 2: ten and people don't feel comfortable because their portfolio is
8:02
Speaker 2: down for an extended period of time, fine, but you've
8:06
Speaker 2: got to prove to me that that's going to happen.
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Speaker 3: First, Well, that, and that's going to hit the entire
8:12
Speaker 3: airline industry. I don't think it'll just target the deltas,
8:17
Speaker 3: you know, like, yeah, maybe Spirit Faar is a little
8:19
Speaker 3: bit better in that type of environment, but I can't
8:22
Speaker 3: imagine it substantially.
8:24
Speaker 2: Yeah, So I think ultimately, if I'm an airline and
8:27
Speaker 2: I'm trying to game this out, I still think adding
8:30
Speaker 2: more premium capacities the right the right thing to do,
8:33
Speaker 2: as long as they're you know, continuing to see that
8:35
Speaker 2: they can fill it. You know, like you don't want
8:37
Speaker 2: to just you don't want to be like, hey, here's
8:40
Speaker 2: a first class plane. You know. It's like, even though
8:45
Speaker 2: I do believe some international carriers do that with some
8:47
Speaker 2: of their planes, just because you know, when you get
8:49
Speaker 2: to these really long haul routes that are you know,
8:51
Speaker 2: eleven twelve plus hours, they're like, okay, we'd rather, you know,
8:55
Speaker 2: just get the money from you know, a smaller number
8:57
Speaker 2: of people flying one flight a day. Okay, we can
8:58
Speaker 2: do that. But domestically I don't know that that makes sense.
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Speaker 2: But so this is what we're seeing with airlines. The
9:06
Speaker 2: other piece that's interesting here, and I'll tease this and
9:09
Speaker 2: then we'll get to it when we come back. But
9:12
Speaker 2: Airbnb is trying to expand its business from just renting
9:17
Speaker 2: out people's homes into you know, kind of being a
9:21
Speaker 2: more a broader travel app that can handle more parts
9:25
Speaker 2: of a trip than just, hey, here's where you're going
9:28
Speaker 2: to stay. That's not a hotel. So to take a
9:30
Speaker 2: quick break, we've got some trivia and we'll talk about
9:33
Speaker 2: Airbnb's expansion plans after this.
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11:33
Speaker 2: All right, so Airbnb, which has been around for we're
11:38
Speaker 2: around fifteen years now right, Mike, Sure, Yeah. So I
11:42
Speaker 2: want to say, like twenty ten is when they originally started,
11:45
Speaker 2: where the whole name came from the fact that they
11:48
Speaker 2: were renting out air mattresses in people's homes for basically
11:52
Speaker 2: like twenty three year olds to sleep, bobing and you know,
11:55
Speaker 2: move around the country and travel and stuff.
11:57
Speaker 3: Founded in seven oh.
11:59
Speaker 2: Seven, okay there. I first heard of them. I think
12:01
Speaker 2: maybe back in twenty ten or twenty eleven. I guess
12:03
Speaker 2: I'm not on the cutting edge. So the big thing
12:07
Speaker 2: they do, obviously, they rent out homes, you know, rooms
12:10
Speaker 2: and homes, all kinds of stuff for you know, short
12:12
Speaker 2: term rentals. They got millions of different listings, all kinds
12:16
Speaker 2: of different stuff you know, you can stay in you know,
12:17
Speaker 2: fake spaceships and mushrooms and anything you want you could basically,
12:22
Speaker 2: you know, rent out from them. But a what a yurt?
12:27
Speaker 2: I don't yurt. Okay, I'm unritable. But what they're talking
12:33
Speaker 2: about trying to get into now is what they call
12:36
Speaker 2: their Experiences and Services Division. And they tried this back
12:39
Speaker 2: in twenty sixteen. It didn't work then, but they did
12:42
Speaker 2: a big app overhaul a couple months ago and what
12:46
Speaker 2: they're trying to do. Are offer additional items, additional things
12:50
Speaker 2: for people to do in addition to just you know,
12:53
Speaker 2: having you booked the place. So, Hey, you're going to
12:57
Speaker 2: Stowe in Vermont. Great, do you want to book a ski? Lesson?
13:00
Speaker 3: How we book a private chef to come into that
13:03
Speaker 3: home you rented in Stow and they'll cook for you
13:07
Speaker 3: for the Yeah.
13:08
Speaker 2: You're heading to the outskirts of Paris. Hey, let's go
13:10
Speaker 2: on a truffle hunt, like you know, like all kinds
13:13
Speaker 2: of stuff that you can do.
13:14
Speaker 4: Here's a fun one. I'm looking up in Portland, Maine
13:17
Speaker 4: with our affiliate up in WGA n here oyster shucking
13:21
Speaker 4: class seventy nine dollars.
13:23
Speaker 2: A guess like that's cool. I like that seems expensive.
13:26
Speaker 2: It's not that hard to shuck an oyster.
13:27
Speaker 4: Well, you know, maybe there's somebody who's never seventy nine.
13:31
Speaker 2: A person though seventy nine? Wait are we shucking the
13:38
Speaker 2: what are we shucking? So?
13:41
Speaker 3: I guess my main question on all of this, and
13:44
Speaker 3: I get that it's integrated into the same place that
13:46
Speaker 3: I'm booking my airbnb, and so maybe there's something there,
13:49
Speaker 3: But what about any of this is something I can't
13:52
Speaker 3: get on trip Advisor well, and.
13:54
Speaker 2: There are a bunch of companies that do this specific thing,
13:56
Speaker 2: like just booking services.
13:58
Speaker 3: I know of them for my upcoming trip. I'm going
14:03
Speaker 3: to Spain next month, very fortunately doing so with my
14:06
Speaker 3: wife for our anniversary, and we've used trip Advisor. We're
14:09
Speaker 3: staying at hotels, not Airbnb's, but we're I've already booked
14:13
Speaker 3: a few of these types of experiences through trip Advisor,
14:16
Speaker 3: where they've got a couple decades worth of reviews built
14:20
Speaker 3: into there for these different types of experiences.
14:23
Speaker 2: Now, the idea of it being one stop shopping, sure,
14:26
Speaker 2: I get that that could be, you know, nice, and
14:28
Speaker 2: I could understand that, but it's it's something where you've
14:33
Speaker 2: you've really gotta, you know, figure out a like how
14:36
Speaker 2: do you make this you know, big enough so that
14:39
Speaker 2: people know to look for it. But the other piece
14:40
Speaker 2: that I've been thinking of on any of this, So
14:43
Speaker 2: it's one thing if you're booking you know something that
14:47
Speaker 2: is I guess like if you're like integrated as someone's
14:51
Speaker 2: booking platform. But let's like the private chef thing is
14:54
Speaker 2: an example. Yeah, let's say that I have a great
14:57
Speaker 2: meal with that private chef and then I go back
14:59
Speaker 2: to the same Airbnb next year, wouldn't I have just
15:03
Speaker 2: gotten like the chef's contact info and just book separately
15:06
Speaker 2: outside the app after.
15:08
Speaker 4: Maybe he's exclusive to Airbnb, maybe he has a deal
15:11
Speaker 4: with them.
15:11
Speaker 3: I don't doubtful, but yeah, yeah, I mean, yeah, fair point.
15:14
Speaker 3: So if it's going to be a repeat, then it's
15:16
Speaker 3: not going to happen. Although if you're booking Airbnb's you know,
15:19
Speaker 3: I don't know how much of that is actually repeat
15:21
Speaker 3: type business. I mean, you're going back to Airbnb, but
15:25
Speaker 3: maybe not to the exact same location. Two would be okay,
15:29
Speaker 3: So a private chef is probably pretty harmless. But you
15:32
Speaker 3: think about some of the experiences like this, do I really,
15:35
Speaker 3: as an owner of a home, feel comfortable with Okay,
15:39
Speaker 3: I've already rented it out. Now I'm allowing a private
15:43
Speaker 3: chef or masseuse to come into the home separately, and
15:46
Speaker 3: they also get my address in details. I would imagine
15:50
Speaker 3: there's been some pushback from home, right, who.
15:52
Speaker 2: Are these people that are coming in? Like, yeah, you've
15:54
Speaker 2: vetted them? Is that okay?
15:57
Speaker 3: So yeah, it's who's liable when the private chef loses
16:01
Speaker 3: it and you know, burns the house? Down they weren't
16:04
Speaker 3: on the rental agreement.
16:05
Speaker 2: Does that happened often? I don't know, But like the
16:09
Speaker 2: whole job is to not burn the house.
16:10
Speaker 4: Down or a guest cuts their finger by an accident.
16:14
Speaker 2: I mean, you know, something harmless like that.
16:16
Speaker 3: But you know, you've you've got some complexities here where Yeah,
16:20
Speaker 3: I've got a rental agreement and insurance over this specific scenario.
16:25
Speaker 3: Now we're completely reshaping it.
16:27
Speaker 2: I don't know.
16:28
Speaker 3: I don't know that this is going to be as
16:30
Speaker 3: big as Airbnb is hoping. I do think like the
16:35
Speaker 3: everything app idea of hey, if I'm booking my Airbnb,
16:39
Speaker 3: why can't I just book my flights, my car rental
16:41
Speaker 3: and other things right in the same app would be useful.
16:44
Speaker 3: But I doubt that's terribly high margin business.
16:47
Speaker 2: Yeah, I mean, I mean there's enough of a business there.
16:52
Speaker 2: Like there's plenty of companies that you know, make their
16:55
Speaker 2: bones on do I mean, like Expedia still exists as
16:58
Speaker 2: a twenty four billion dollar company.
17:00
Speaker 3: I've got my credit card through them.
17:02
Speaker 2: Yeah, they have a credit card. They do what do
17:04
Speaker 2: they do? What what do you what they offer? What
17:08
Speaker 2: do they do on the credit Like, yeah, like you know,
17:10
Speaker 2: how did you picked out we're talking about, you know.
17:13
Speaker 3: Yeah, so I picked it because you know, we usually
17:16
Speaker 3: stay in hotels when we travel, and I attempt to
17:19
Speaker 3: book my flights through them or book my cars through them,
17:23
Speaker 3: and so they have a credit card. If you use
17:25
Speaker 3: it on their own site, then I think it's five
17:27
Speaker 3: percent cash rewards back. Otherwise it's two.
17:30
Speaker 2: Oh that's nice.
17:31
Speaker 3: Yeah, yeah, so but but yeah, I mean those things
17:35
Speaker 3: do exist. They're profitable companies, so you know that exists.
17:39
Speaker 3: You know, Uber wants to get into the same type
17:41
Speaker 3: of business of booking everything there. Does Airbnb have rewards?
17:46
Speaker 3: That's that's the main thing that I feel like is lack.
17:48
Speaker 3: I don't believe so because the other thing, Expedia also
17:51
Speaker 3: owns Verbo. So you know, when I'm booking, uh you know,
17:55
Speaker 3: when I rarely stay for travel outside of a hotel
17:58
Speaker 3: instead in a house, I'm trying to book on Verbo
18:00
Speaker 3: because they're part of my rewards points system. That seems
18:05
Speaker 3: to be lacking for a travel company.
18:06
Speaker 2: Yeah. I guess the counterpoint is if they thought it
18:11
Speaker 2: would matter, they'd probably add it by now. Yeah, you know,
18:15
Speaker 2: I wonder why they don't.
18:17
Speaker 3: Actually would seem pretty easy to partner with some credit
18:20
Speaker 3: card company and offer rewards points on it.
18:24
Speaker 2: Yeah, I can't make heads or tails of it, but
18:29
Speaker 2: there must be some reason. Again, it's a fairly mature company.
18:32
Speaker 2: It's been around eighteen years now, and you know, like you,
18:35
Speaker 2: it doesn't it's not that hard to roll out a
18:38
Speaker 2: rewards program. I mean, like you go to like the
18:40
Speaker 2: deli down the street and they, you know, clip your
18:42
Speaker 2: card ten times and you get a free sandwich. So
18:46
Speaker 2: I don't know, just surprising to me. Yeah, give me
18:49
Speaker 2: a sandwich when I go to the Airbnb.
18:51
Speaker 4: Taking a look, show me how to make a sandwich.
18:55
Speaker 2: Now we're cooking pun intended. The Dow Jones industrial averages
19:00
Speaker 2: up sixty seven point of Rooneyes, the S and p
19:03
Speaker 2: is up seventeen, NASDAC up fifty eight, So up about
19:06
Speaker 2: you know, three to twentieth seven percent to a quarter percent.
19:10
Speaker 2: I know that people don't usually that's helpful talking twentieth,
19:13
Speaker 2: but we do. So get ready, we're gonna take a
19:17
Speaker 2: quick break here. When we come back, we do have
19:19
Speaker 2: the trivia answer and then I want to talk McDonald's
19:23
Speaker 2: after this. I think there's something like there's a lot
19:29
Speaker 2: of meat there. Again, pun intended and so we're gonna
19:31
Speaker 2: talk McDonald's when we return.
19:40
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:44
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:50
Speaker 1: Time now for Wall Street. Watch a complete look at
19:53
Speaker 1: what's moving market so far today right here on the
19:56
Speaker 1: Financial Exchange Radio Network.
20:00
Speaker 4: Slightly impositive territory, one day after the SMP five hundred
20:03
Speaker 4: and NASDAK notched yet another record high. At the moment,
20:08
Speaker 4: the Dow is up by nearly two tenths of one percent,
20:11
Speaker 4: or seventy seven points. SMP five hundred is up by
20:15
Speaker 4: nearly three tenths of one percent, or seventeen points higher.
20:18
Speaker 4: Nasdaq is up nearly three tenths of a percent or
20:21
Speaker 4: fifty seven points higher. Russel two thousand mostly flat, dipping
20:24
Speaker 4: into negative territory, a ten year treasure reil currently at
20:28
Speaker 4: four point four zero percent mostly flat, and crude oil
20:32
Speaker 4: is off about three quarters of a percent, creating at
20:34
Speaker 4: sixty five dollars in fifty three cents a barrel. Big
20:37
Speaker 4: news in the tech space today surrounding struggling chip maker
20:42
Speaker 4: Intel after it reported a wider quarterly loss and also
20:45
Speaker 4: said it will cut fifteen percent of staff as it
20:48
Speaker 4: seeks to refocus on AI chips. Intel stock is now
20:51
Speaker 4: down nine percent. Meanwhile, the FCC approved Paramounts eight billion
20:56
Speaker 4: dollar merger with Skydance Media, paving the way for the
20:59
Speaker 4: deal to close in the next few weeks. Paramount shares
21:01
Speaker 4: are now down actually over one percent. Sticking with media,
21:05
Speaker 4: where Charter Communications is dropping seventeen percent after the cable
21:10
Speaker 4: operator fell short of quarterly expectations. Elsewhere, Senteen shares are
21:15
Speaker 4: up six percent despite the managed care provider posting a
21:19
Speaker 4: quarterly loss that saw membership declines across its Medicaid and
21:23
Speaker 4: Medicare businesses. Decker's outdoor stock is jumping twelve percent after
21:28
Speaker 4: the maker of ug boots beat earning zan revenue expectations.
21:32
Speaker 4: Deckers cited higher than expected sales of its flagship brand
21:37
Speaker 4: as well it's as popular Hoka sneakers. Volkswagen lowered its
21:41
Speaker 4: financial guidance after its first half earnings were hit by
21:44
Speaker 4: one and a half billion dollars of tariff costs, and
21:47
Speaker 4: online used car retailer Carvana upgraded by Oppenheimer to outperform
21:52
Speaker 4: with a firm set Carvano's business model is now humming,
21:55
Speaker 4: generating meaningful cash that stock is up by two percent,
22:01
Speaker 4: Tucker Silva and that is Wallstreet Watch. And in the
22:03
Speaker 4: previous segment we ask the trivia question what is the
22:06
Speaker 4: name of Constantinople? Today that will be as stan Bull.
22:11
Speaker 4: Mindy from Jericho, New York is our winner today. She's
22:14
Speaker 4: listening on Serious XM Business Channel one thirty two. Congrats
22:18
Speaker 4: to Mindy. She's taking on the Financial Exchange Show t
22:21
Speaker 4: shirt and we play trivia every day here in the
22:24
Speaker 4: Financial Exchange See complete contest rules at Financial Exchange Show
22:28
Speaker 4: dot com.
22:30
Speaker 2: Mike, I really want to dig in on this McDonald's
22:32
Speaker 2: story from the Wall Street Journal, and not just because
22:37
Speaker 2: you're parcel to McDonald's. Oh I you're gonna say you're hungry,
22:41
Speaker 2: then I'm hungry. But look, I have a long, deep
22:45
Speaker 2: love for McDonald's. It's it's something that I really enjoy
22:49
Speaker 2: and so this article about hey, how do they lose
22:52
Speaker 2: their way on pricing is interesting to me. And you know,
22:57
Speaker 2: I'm trying to sort through what's going on here because
23:01
Speaker 2: the article talks about a few different things that we
23:04
Speaker 2: have to consider. The first is that you have to
23:05
Speaker 2: remember most McDonald's that operate in the United States are
23:08
Speaker 2: not owned by McDonald's corporate, they're franchise owned. Ye. And
23:12
Speaker 2: it's not to say that, you know, franchise owners don't
23:16
Speaker 2: have any money and things are you know, always hard
23:18
Speaker 2: for them, because I think at this point, in order
23:20
Speaker 2: to be a franchise owner of a McDonald's, I think
23:23
Speaker 2: you have to commit to being able to own like
23:25
Speaker 2: five plus or eight plus. So it's like you got
23:28
Speaker 2: to have some cash behind you in order to do this.
23:31
Speaker 2: But obviously, when McDonald's runs promotions, you know, and anything
23:35
Speaker 2: that they're doing on a national level, their franchise owners
23:38
Speaker 2: have to eat that in some way, shape or form
23:41
Speaker 2: in their cost structure, and so it can become difficult
23:44
Speaker 2: in order for the franchises to get along with corporate
23:48
Speaker 2: and the employees to get along with franchises. It's it's
23:51
Speaker 2: it's not always easy for all of those things to coexist.
23:55
Speaker 2: But there's one quote in here that I want to
23:58
Speaker 2: get at just because I think like, this is one
24:01
Speaker 2: where I'm trying to figure out, you know, what happened here,
24:05
Speaker 2: And it's about two thirds of the way through the piece,
24:08
Speaker 2: and it says, quote, fast food in general and specifically
24:12
Speaker 2: no longer feels like the good value that it once
24:15
Speaker 2: did the kind of where you can get a filling
24:17
Speaker 2: meal for five to eight dollars, said Terry Wu, aged
24:20
Speaker 2: thirty six, And I guess what I'm wondering here on this,
24:26
Speaker 2: And I don't have any data to back this up,
24:29
Speaker 2: but which is always like a great thing to say, like, hey,
24:31
Speaker 2: I got no data to back this up. But here's
24:33
Speaker 2: my theory. You know, here's where I'm going with this.
24:37
Speaker 2: When when Terry first came into the workforce, he's thirty
24:41
Speaker 2: six now, so fifteen years ago, twenty ten was when
24:43
Speaker 2: he came into the workforce. If you will get average
24:47
Speaker 2: hourly earnings. This is according to the BLS Job report
24:49
Speaker 2: that we get. So I'm not using you know everything
24:51
Speaker 2: like crazy crazy this and whatever, but one data set,
24:55
Speaker 2: average hourly earnings were around twenty two dollars an hour
24:58
Speaker 2: back in March of twenty ten. Today it's thirty six thirty.
25:03
Speaker 2: So if you do the math on that, since Terry
25:05
Speaker 2: came into the workforce, and again I picked March, but
25:09
Speaker 2: let's pick June just because that's probably when he graduated.
25:11
Speaker 2: So June it was twenty two fifty. If you look
25:15
Speaker 2: at this, average wages have gone up by sixty one
25:19
Speaker 2: percent over that time. And let's say the average big
25:23
Speaker 2: mac was seven dollars back in even let's call it
25:26
Speaker 2: six dollars, you know, six dollars back then. If you
25:29
Speaker 2: multiply that time sixty one percent, it gets you to
25:32
Speaker 2: nine sixty six, which is pretty close to the average
25:34
Speaker 2: cost of a big mac right now. So as a
25:38
Speaker 2: in terms of a big max cost per hour of work,
25:43
Speaker 2: I suspect it's basically the same as it was fifteen
25:46
Speaker 2: years ago. But the problem and why everyone hates inflation
25:50
Speaker 2: is it went up really quickly in a few year
25:53
Speaker 2: span period and made it really noticeable as opposed to
25:56
Speaker 2: it playing out over a longer time span. And so
26:00
Speaker 2: because of that, that, in my opinion, is why McDonald's
26:04
Speaker 2: is struggling here. Because we all I still remember, you know,
26:07
Speaker 2: my grandfather when he was still alive, he'd be like, hey,
26:09
Speaker 2: I'd go see you know, Brooklyn Dodgers game at the
26:11
Speaker 2: Polo Grounds for a nickel. And you can't do that anymore.
26:15
Speaker 2: And it's the same vibe here, not like I'm not
26:18
Speaker 2: saying it in a critical fashion, but just hey, because wrong,
26:24
Speaker 2: Yes I am saying he's wrong. Yeah, you know, like
26:27
Speaker 2: if you look at the cost of a McDonald's meal
26:30
Speaker 2: relative to where it was fifteen years ago, it's basically
26:34
Speaker 2: gone up by about as much as wages have. Same thing.
26:37
Speaker 2: If you look at Chipotle, Tucker, you're a big Chipotle fan.
26:40
Speaker 2: When you graduated, you're a moderate Chipotle fan. You've gone
26:45
Speaker 2: to Chipotle? Yes, correct, we got that. When you graduated
26:53
Speaker 2: from college. What did it cost to get a meal
26:55
Speaker 2: at Chipotle? Ten eleven bucks? Yeah, I was gonna say.
27:00
Speaker 2: Now it's like sixteen seventeen. I went there the other night,
27:03
Speaker 2: just as an example, it's up about sixty percent over
27:06
Speaker 2: that time. It's the same thing. And so I think
27:09
Speaker 2: part of this is we get anchored onto certain prices
27:13
Speaker 2: because it's what we were used to it. You know,
27:16
Speaker 2: usually a certain point in our life, like the point
27:18
Speaker 2: in our life when we started paying for things ourselves,
27:21
Speaker 2: and whether that was when we were fourteen, eighteen or
27:24
Speaker 2: twenty two, when when prices change from that reference point,
27:30
Speaker 2: when they move enough, we start to feel it. If
27:32
Speaker 2: it goes from eleven to twelve dollars, we don't, but
27:34
Speaker 2: if it goes from eleven to eighteen, we do. And
27:37
Speaker 2: so part of this that I'm wondering about is a
27:40
Speaker 2: lot of the complaints that you're seeing, Like, are are
27:43
Speaker 2: there many like eighty year olds that post social media
27:46
Speaker 2: complaints of McDonald's prices? Not that I'm aware of. It's
27:52
Speaker 2: a lot of people.
27:53
Speaker 3: I don't know eighty year olds on social media, to
27:55
Speaker 3: be honest, though, oh I do.
27:57
Speaker 2: But I think it's a lot of people in their
27:59
Speaker 2: thirties and forty where the reference prices have moved far
28:02
Speaker 2: enough that it's just like it feels wrong. And so
28:07
Speaker 2: I'm actually gonna say, I don't know if this is
28:09
Speaker 2: a McDonald's thing. I think this is just a bunch
28:12
Speaker 2: of millennials are now seeing stuff that's way more expensive
28:15
Speaker 2: than it was when they first started paying for it themselves,
28:19
Speaker 2: and that's what the reaction is.
28:21
Speaker 3: So I'm gonna I'm gonna actually say, I don't think
28:26
Speaker 3: that's McDonald's problem. I still think they are the cheapest
28:30
Speaker 3: game out there. I just think that there is so
28:32
Speaker 3: much more competition now. That's where I would go, And
28:36
Speaker 3: that's that was mentioned in.
28:37
Speaker 2: The piece, right, more choices.
28:39
Speaker 3: You know, there was not the option when I graduated
28:42
Speaker 3: college to go to a Chick fil A that was
28:44
Speaker 3: a uniquely you know, position fast food restaurant in certain
28:48
Speaker 3: parts of the country in an out Burger and all
28:50
Speaker 3: of these other fast food joints have popped up because
28:54
Speaker 3: that's just a growing piece of the food segment, of
28:57
Speaker 3: the dining out segment, is people want to go do
28:59
Speaker 3: the fast food thing that they don't as much like
29:03
Speaker 3: TGI Fridays and those other places that have existed for
29:06
Speaker 3: decades as a sit down restaurant. They're pushing towards these
29:08
Speaker 3: types of places, and so I'm more interested in Hey, McDonald's,
29:12
Speaker 3: if you're going to stick with your theme of being
29:15
Speaker 3: the standout, cheapest option out there, then you kind of
29:19
Speaker 3: have to go back to what made you that in
29:22
Speaker 3: the first place. I think about like the remember the Founder,
29:25
Speaker 3: the movie about McDonald's that was really a decade ago.
29:28
Speaker 3: It was all about the efficiency, consistency and cost cutting.
29:33
Speaker 3: And so McDonald's, what you what are you going to
29:35
Speaker 3: be able to supply your franchises with this time to
29:38
Speaker 3: do it again?
29:38
Speaker 2: Right? Is it robotics?
29:41
Speaker 3: Is it the outsourcing of ordering? Further, I mean, I
29:44
Speaker 3: know they've done a fair bit with the app to
29:46
Speaker 3: try and push sales that way, but that would be
29:48
Speaker 3: my question for McDonald's now is is that your goal
29:52
Speaker 3: to maintain this position of the low cost fast food place,
29:56
Speaker 3: Then you're gonna have to take it a step further
29:58
Speaker 3: and it's going to be that's the old The method
30:00
Speaker 3: I can think of is pushing into robotics and automation.
30:03
Speaker 2: And this is all happening with the background of b
30:05
Speaker 2: prices going up as well. Yep, yep. So there's that.
30:09
Speaker 2: Let's see. Let's take a quick break here. But when
30:11
Speaker 2: we come back, stack.
30:12
Speaker 1: Roulette here the Financial Exchange every day from eleven to
30:16
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30:20
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30:41
Speaker 1: Face is the Financial Exchange Radio Network. Ladies and gentlemen
30:47
Speaker 1: the weekend, Mike, what.
30:53
Speaker 3: Do you got for me for stack Roulette? I want
30:55
Speaker 3: to take talk a little bit about robotaxes. We were
30:58
Speaker 3: talking about Tesla yesterday on their abysmal earnings, and the
31:02
Speaker 3: Financial Times has just a piece out what will it
31:04
Speaker 3: take for robo taxis to globe to go global? Speaks
31:08
Speaker 3: a lot about the dominant player in this space, which
31:11
Speaker 3: is Waimo to this point, and what it is that
31:13
Speaker 3: Tesla's trying to do, and if I were to summarize,
31:16
Speaker 3: what Tesla's attempting to do is precisely what Weimo's done,
31:21
Speaker 3: but for I'm guessing about a sixth of the cost
31:26
Speaker 3: per vehicle and tall order to pull off. I mean,
31:31
Speaker 3: for anyone unfamiliar with Weaimo. They are alphabet meaning Google's
31:34
Speaker 3: division of self driving cars. They're prevalent in Phoenix, Arizona, Austin, Texas,
31:41
Speaker 3: San fran maybe San Diego as well. I don't know
31:45
Speaker 3: about La. They operate pretty darn well, pretty darn safely.
31:49
Speaker 3: They've completed hundreds of thousands of rides at this stage,
31:52
Speaker 3: but most analysts are guessing that it costs them one
31:55
Speaker 3: hundred and fifty grand to put one of these cars together.
31:58
Speaker 3: They are an electric vehicle with a big set of
32:02
Speaker 3: cameras on the top, and while they have proven relatively safe,
32:07
Speaker 3: not you know, at one hundred and fifty grand per vehicle.
32:10
Speaker 3: That's not something that is going to scale very easily.
32:13
Speaker 3: What Elon, Musk and Tesla are attempting to do is pretty
32:16
Speaker 3: much that exact same thing with a car that you
32:20
Speaker 3: know sells retail for what with full self driving like
32:25
Speaker 3: forty five to fifty thousand dollars. Can they pull it
32:29
Speaker 3: off and can it scale? Is the question at least
32:33
Speaker 3: here domestically. Obviously China and Chinese made car companies are
32:37
Speaker 3: trying to pull off the same thing elsewhere.
32:39
Speaker 4: Yeah, changes to Medicaid occur almost every year, and if
32:43
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32:47
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32:50
Speaker 2: Well.
32:50
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33:37
Speaker 1: The proceeding was paid for and the views expressed are
33:39
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33:41
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33:48
Speaker 2: I got a couple pieces from the Financial Times that
33:50
Speaker 2: I want to cover. First. One that's really interesting to me.
33:54
Speaker 2: Chinese kindergarten enrollment has dropped by twenty five percent in
33:59
Speaker 2: the last four years. What in twenty.
34:04
Speaker 3: Twenty oneation dropping that quickly.
34:06
Speaker 2: In twenty twenty, I'm sorry, in twenty twenty there were
34:09
Speaker 2: actually it's really in three years. In twenty twenty one,
34:12
Speaker 2: there were forty eight million Chinese children enrolled in kindergarten.
34:16
Speaker 2: Today there are thirty six million. That's not great from
34:22
Speaker 2: a population stability standpoint. You again, God, if you think
34:26
Speaker 2: the United States has demographic problems. Take a look at China.
34:30
Speaker 2: In China, they have seen nationally again, Like Chinese government
34:35
Speaker 2: keeps these stats. They are what they are, so like
34:37
Speaker 2: take it with the little grain of salt. The number
34:39
Speaker 2: of kindergartens has dropped from two hundred ninety five thousand
34:42
Speaker 2: to around two hundred and fifty thousand during that time
34:45
Speaker 2: as well.
34:46
Speaker 3: See, the government really tries to restrict the data on
34:49
Speaker 3: things like how many births there are and puts out
34:51
Speaker 3: all sorts of fake data. But every once in a while,
34:53
Speaker 3: I feel like we get one of these statistics that
34:56
Speaker 3: is indicative of what's going on with the pop but
35:00
Speaker 3: not directly vetted by the Chinese government or in some way,
35:04
Speaker 3: shape or form, and that.
35:06
Speaker 2: The National Bureau of Statistics from China. Wow. The other
35:10
Speaker 2: thing that's fascinating, This is gonna get worse by the
35:12
Speaker 2: way Chinese kindergartens. It doesn't. It's basically like preschool, so
35:16
Speaker 2: it encompasses several years. And the reason why this is
35:20
Speaker 2: gonna get worse is that this still has a number
35:22
Speaker 2: of people who were born in twenty nineteen and twenty twenty,
35:26
Speaker 2: when China was having twelve to fourteen million births a year,
35:30
Speaker 2: it's down to nine million now, and so basically like
35:33
Speaker 2: the peak that we saw was around eighteen million in
35:36
Speaker 2: twenty sixteen, there's a pretty good chance that the number
35:40
Speaker 2: of children enrolled in Chinese kindergartens drops by fifty percent
35:45
Speaker 2: from its peak in the next couple of years.
35:49
Speaker 3: It's pretty wild.
35:51
Speaker 2: Which is wild. The other piece that I want to
35:53
Speaker 2: read from the Financial Times, just because again we're always
35:57
Speaker 2: trying to you know, stort through what's going on in
35:58
Speaker 2: like some of the details of these trade deals. This
36:01
Speaker 2: published thirty three minutes ago. Quote cracks widen in Japan
36:04
Speaker 2: and US's interpretation of tariff trade deal. Oh boy, this
36:08
Speaker 2: is from uh Harry. The US will secure ninety percent
36:12
Speaker 2: of profits from joint investments with Japan only if it
36:15
Speaker 2: takes on a proportional amount of risk and financing, Tokyo
36:18
Speaker 2: said on Friday, as cracks widened in the two allies interpretation.
36:22
Speaker 2: Japanese officials also said there's no written agreement with Washington
36:25
Speaker 2: and that they would not be drawing up a legally
36:27
Speaker 2: binding one after the Trump administration officials claimed Tokyo would
36:31
Speaker 2: back investments from the US which American taxpayers would reap.
36:34
Speaker 2: Nine tenths of the profits. So pretty much like the
36:38
Speaker 2: Japanese side is like, we're not signing anything to this effect. Actually,
36:42
Speaker 2: like you can say this, but here's our interpretation and
36:46
Speaker 2: we're not signing anything that we're actually gonna do this.
36:50
Speaker 3: Well, look, I mean this could go a different direct
36:55
Speaker 3: GEO really a deal, No, it's a question, it's not.
36:58
Speaker 3: And so this could go in a few different directions.
37:00
Speaker 3: Either we could be not talking about this on Monday
37:03
Speaker 3: because it gets worked out and gets signed and gets executed.
37:07
Speaker 2: It's not going to get signed, yeah, Japan saying like
37:10
Speaker 2: Japan saying they're not like they're not going to sign anything. Yeah,
37:18
Speaker 2: I mean, like it is what it is, like that
37:20
Speaker 2: the tariffright apparently is down to fifteen, but the Japanese
37:23
Speaker 2: negotiators are saying that they are not actually signing a
37:27
Speaker 2: formal deal, like it's it's done for what it is
37:31
Speaker 2: and the teriffrate's gonna be what it's gonna be. But
37:34
Speaker 2: Japan is saying they're not signing anything.
37:36
Speaker 3: Right, So does the investment come, does the other side
37:38
Speaker 3: of that deal come, and then if it doesn't get executed,
37:41
Speaker 3: what's the terrified might rate might be fifteen percent for now.
37:45
Speaker 3: But once again, if you're an importer here in the
37:47
Speaker 3: United States, you have zero confidence of where it's going
37:49
Speaker 3: to be tomorrow.
37:51
Speaker 2: Taking a look at markets, as we had towards the
37:53
Speaker 2: top of the hour, the Dow is up four hundred
37:54
Speaker 2: I'm sorry, forty seven points, not four hundred and seventy.
37:57
Speaker 2: The S and P is up sixteen and Nasdaq up fifty,
38:00
Speaker 2: so we still have S and P and NASDAC on
38:02
Speaker 2: track for new all time highs if they close at
38:04
Speaker 2: their current levels. The Dow is still just a little
38:07
Speaker 2: bit off that, about one percent shy of their previous
38:10
Speaker 2: all time high. We'll see if that can get there
38:12
Speaker 2: as well. Big big, big, big, big, big, big, big
38:15
Speaker 2: big week next week for data and earnings. We will
38:19
Speaker 2: see you Monday. Have a great weekend.