Travel costs in the United States rise as vacation demand rises from the lows of the pandemic

Travel costs to the United States are soaring as demand reaches some of its highs since the start of the global pandemic, a trend that shows little sign of stopping as summer travel warms.

Airline bookings in February reached their highest point since COVID-19 decimated U.S. flights in early 2020, while hotel occupancy is higher than for most of the past two years. Coupled with rising labor and energy costs and shortages of supplies, these factors are driving travel prices to leap forward, contributing to the fastest rise in consumer prices in general since the 1980s. Hotel prices, for example, rose at the fastest rate ever recorded in February compared to a year ago, according to statistics from the U.S. Bureau of Labor.

After hearing stories of low-cost hotel room rates and airline tickets during the height of the pandemic, travelers expect to find bargains. Instead, they are finding vacations with jaw-dropping price tags attached, often double what they expected to spend, said Robike Noll-Faries, owner of Seeitall 2 Travel, a travel agency in Paramus, NJ

Those sharp price hikes and a potentially historic rise in demand for leisure don’t get in the way of travelers’ plans for summer fun, Noll-Faries said.

“People look at these prices and complain, but it’s been two years, they want to go on vacation and they are going”, Noll-Faries She said. “It’s time.”

Question, the prices go up

The number of US air passenger journeys for domestic and international flights in February was 19.9 million, according to data from Airlines Reporting Corp., which follows more than 200 airlines and more than 10,000 retail travel agencies. It was the largest number of trips since the start of the pandemic, while still below 24.9 million trips in February 2020, it was well above the 2.2 million industry low in April 2020. airlines reflected this increase in demand, with the national average round-trip ticket price climbing to $ 464 in February, from $ 346 a year earlier.

Airlines are still lagging behind pre-pandemic capacity levels, with March total seating below 2019 levels of 8% for domestic flights and 24% for international flights, according to the company. analysis of the aviation sector OAG. Seating levels, however, are at or close to their highest point since March 2020.

U.S. hotel occupancy reached 66.9% in the week ending March 19, according to industry analysis and data firm STR. This is the highest level since August 2021 and beyond rates for all of 2020 and much of last year. The average daily rate for a hotel room in the United States was $ 137.39 in February, up from $ 98.31 in February 2021, according to STR, which measures the metric by dividing total revenue by the number of rooms. sold.

Rising prices have yet to discourage buying, said Vivek Pandya, Adobe’s senior digital insights manager who has researched airline travel demand.

“At the moment, the desire to travel is really strong and this is driving continuous bookings amidst higher prices,” Pandya said.

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Airfare and other travel costs are rising this year amid rising demand and rising costs for businesses.
Source: Virojt Changyencham / Moment via Getty Images

Demand and prices will continue to rise as summer travel season approaches, as COVID-19 cases decline and attitudes towards health risks subside. Pandia said. But several factors, most notably an increase in cases of COVID-19 variants, could upset that trajectory.

“It’s a pretty unstable environment, so it’s very difficult to predict,” Pandya said.

Travel at Best Western Hotels and Resorts, which has nearly 2,000 locations in the U.S., is surpassing 2019 occupancy levels this year, particularly on Fridays and Saturdays, said Larry Cuculic, president and CEO of Best Western Hotels. and Resorts and its parent company, BWH Hotel Group.

“We are optimistic that pent-up demand will translate into strong spring and summer seasons with business travel starting to return to normal in the second half of 2022,” Cuckoo said in an email.

‘Degree of acceptance’

The Russian invasion of Ukraine caused fuel costs to rise, with the average price per gallon of gasoline at $ 4.23 as of March 31, an increase of more than 60 cents in a month, according to AAA. The war could also dampen some US travel to the euro area, potentially increasing demand for high-end domestic resorts, shelps Bram Gallagher, senior economist at CBRE Hotels’ Americas Research.

A sharp rise in gasoline prices or hotel accommodation costs are unlikely to increase travel spending, particularly for wealthier travelers, said Chris Woronka, a leisure and accommodation analyst with Deutsche Bank. This has allowed high-end hotels and resorts to easily pass the higher costs on to customers.

“When everything is going up, there can also be some degree of acceptance,” Woronka said.

However, like much of the impact of inflation, higher prices are likely to hit the most budget-conscious travelers hardest. This could fuel demand for cheaper roadside motels this summer.

“Everyone has a budget,” Woronka said. “If the gas stays up or goes up, with all these other costs rising … at some point you will have a subset of customers saying, ‘Look, I just can’t make this trip.'”

Rising costs

The shortage of semiconductors has held back the production of new cars, which is driving up rental car costs as companies try to secure new and used vehicles.

Hotels, meanwhile, are facing multiple cost increases, but nothing more than the cost of labor, as a shortage of workers has forced the industry to raise wages. In February, there were nearly 1.7 million jobs in the leisure and hospitality industry, and hourly wages were $ 19.68 in March, up from $ 16.31 pre-pandemic, according to the Bureau. of Labor Statistics.

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This has forced many hotels to keep staffing levels relatively low, leaving some rooms unsold due to a lack of workforce.

“This is a business problem,” Gallagher of CBRE said. “Many hotels will have to decide: ‘How much do I really want my hotel? Can I afford the labor cost?’ This could hinder demand. “

So far, hotels have “perfectly passed on” the higher costs to consumers, said Smedes Rose, director of Citi which focuses on housing, games and leisure companies. It is unclear, however, how long hotel guests will agree to pay more for a room in a hotel with fewer staff and amenities. For now, these hotels are reviewing their budget plans and are almost starting from scratch. Executive positions that were eliminated in 2020 may never return. Some services that have been paused may never return.

“It’s probably quite complex, but you rarely have the opportunity to shut down and have zero revenue and zero costs and then just revive an industry,” Rose said.