If You're Planning To Travel This Summer Don't Be Surprised When You Have To Pay More For Your Vacation

Market Analysis

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After a year of revenge travel and pent-up demand, Americans are not ready to settle down, as the travel demand has not quite waned according to booking aggregator Hopper.

In a Hopper 2023 Travel Outlook Report released late last year, findings indicate that despite the tumultuous travel season many experienced in 2022, more than 96% of Hopper users have said they are planning to take at least one trip this year. What’s more, nearly 80% have at least one vacation on the books, and half are traveling to see friends and family.

After years of lockdown restrictions and border closures, millions took to the skies, seas, and roads in droves last year, with air traffic hitting 70% of pre-pandemic levels globally by mid-2022.

This year, however, is not looking to be any different, as many industry experts predict yet another record-shattering year for travel and tourism. Extensive research by Booking.com, one of the world’s biggest travel agencies found that 73% of people are even more optimistic this year about travel than they were in 2022.

With most, if not all COVID-related restrictions now lifted in most countries, those looking to travel this year will need to cough up slightly more for their vacations as prices for travel have surged in recent months, and experts estimate it will only get more expensive in the coming months.

Prices are steadily climbing, again

Aside from everyday goods and services that have gotten more expensive in recent months due to stubbornly high inflation, nearly every aspect of travel has gotten pricier since last year.

Readings from Nerd Wallet’s Travel Price Index, which tracks seasonal price adjustments in travel costs, found that the overall cost of travel was up 11% year-over-year in March 2023, outpacing the overall 6% inflation rate in the U.S.

Between January and February 2023, overall prices climbed 4%. Rising fuel costs, pent-up demand, and limited airline capacity helped to drive up costs, with travel costs now 17% higher in February 2023 compared to the same period in 2019, before the pandemic.

Even after prices peaked last year, they still haven’t come down, and they’re set to remain elevated for the rest of the year going forward.

With inflation higher than what policymakers would typically like it to be, even as the Federal Reserve remains aggressive in their rate hikes to help slow down the economy and increase the cost of borrowing, consumers will see their travel budgets tighten even more this year as prices for hotels, airlines, and dining remain high.

Traveler timelines are changing

Higher prices for airfares and fuel have meant that travelers are booking holidays and getaways at different intervals than what they were before the pandemic.

The trend of last-minute bookings has been on the rise, as more consumers are hoping to wait for prices to come down. This is already somewhat true, as research from last year illustrates how consumers have already started changing their traveling habits since Thanksgiving.

Usually, around 70% of flights for Thanksgiving have already been booked by or near the end of October - but those figures were down 7% compared to 2019 according to insights shared by Condé Nast Traveler. By mid-December last year, typically a peak travel period for many consumers, domestic bookings were down 17%, while spending was down 12% in comparison to the same period before the pandemic.

As demand continued to climb, and airlines faced staggering labor shortages, prices remained slightly elevated for much of the year, even as the summer of travel chaos from 2022 managed to cool down.

Still, experts estimate that airfare prices will rise by 8% this year, still outpacing the rate of inflation, which ending December 2022 stood at 6.5%.

Even if consumers are hoping to travel during shoulder seasons, such as early spring or late fall, many will continue paying more than what they did last year.

The same report from Hopper found that 80% of customers will either spend the same or more on travel this year as concerns about the economy and persistent inflation eat deeper into consumers' pockets and disposable income.

Shorter window periods could mean that we experience a steady surge of travel demand over the summer, which could help keep prices steady. Yet, consumers shouldn't bargain on finding last-minute deals for flights, hotel rooms, holiday deals, or vacation packages in Scotland, Europe, Asia, or other popular destinations this summer.

The way people travel is changing

Higher costs and fluctuating demand aren’t the only things that have changed the way people have been traveling in recent years.

There has been a significant shift in what consumers are looking for in their travel experiences, even if it means booking a holiday or vacation on a tighter budget.

The stress and anxiety-inducing pandemic, followed by ongoing geopolitical tension and now economic uncertainty has seen different travel experiences become increasingly popular over recent months, as consumers are looking to book getaways that focus on mental and physical well-being.

Travelers are now more eager to go on a break that focuses on improving their mental health, and physical well-being, or even booking retreats to help with the transition process of pregnancy and menopause.

Another trend, which according to Booking.com research has seen growing popularity is erotic escapes and retreats that help them explore their romantic or sexual experiences. More than a third, or 44% of travelers are looking to go on erotic retreats this year, or planning to do so in the coming months.

Sustainable travel has also become a big deal as of late, but not a lot of travelers have put their money where their mouth is, as costs eat deeper into their travel budgets.

Yet, some consumers are eager to become more environmentally conscious with their travel choices, booking with airlines that have a slightly lower carbon footprint, or opting to stay at hotels and lodges that have sustainable efforts in place to minimize their impact on the local environment.

A recent survey found that nearly six in ten travelers would be likely to choose more sustainable accommodation if the option was available to them. What’s more, 60% of respondents said they are willing to support local businesses that follow sustainable practices, while other ecotourism options play an important role in their travel purchase decisions.

It’s a pocket of the travel and tourism market that’s still growing, and in coming years we could see a growing number of consumers willing to pay more and be more supportive of sustainable travel purchases and holiday packages. Let’s hope prices have at least somewhat eased by then.

Parting thoughts

Traveling is changing, and how consumers travel and what they deem more important have also changed in recent years coming out of the pandemic. Yet, now this time, travelers are burdened with higher prices, for airfares, hotels, restaurants, and experiences.

With pent-up demand and revenge travel, prices have remained somewhat elevated this year already, and many predict that the cost of travel will remain elevated for much of the coming year.

Holiday getaways will potentially become shorter, as consumers look to save money where they can, and experiences will become less frequent while on vacation. Yet, despite the tumultuous economic conditions and labor shortages still plaguing the tourism sector globally, travelers have for many parts remained resilient, looking to yet again take to the skies and seas this year. Let’s hope they can afford to.

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