Measuring the Impact of Inflation on the Travel Industry

After two years of pandemic restrictions, Americans are eager to hit the road and take to the skies this summer, with some analysts predicting anywhere from 73 to 92 percent of people planning to travel in the next six months.

As travel intent rises, booking windows are inching closer to pre-pandemic timeframes. According to Expedia Group, search windows in Q1 lengthened, as the “global share of searches in the 180+ day search window increased 190 percent, while the 0- to 21-day search window decreased 15 percent quarter-over-quarter.”

“What’s notable about these trends is that last summer saw a record-breaking recovery in many ways, but a large segment of traveler behavior was not pre-planned,” said Stephanie Dworak, senior client strategy director at PMG. “The shorter booking windows of 2021 showcased quick planning to booking cycles and demonstrated the flexibility of the traveler. More recently, however, we’re seeing travelers in 2022 more confident in the long-term as evidenced by booking trips further out and trips to venues and locations that require a bit more pre-planning.” 

Major U.S. cities like Chicago, Las Vegas, and New York topped the list of the most popular vacation spots for travelers in Q1, in addition to beach destinations like Cancun, Honolulu, and Miami. This trend differs from last year, which saw rural areas jump in popularity. The comeback of cities is a good sign for the recovery of metro areas.

Lodging reservations for hotels and vacation rentals increased a combined 35 percent quarter-over-quarter across global markets, while bookings in North America, APAC, Latin America, and EMEA experienced double-digit growth.

American Express and Visa saw significant increases in travel purchases, and cross-border spending rose 38 percent last quarter. Airlines and hoteliers saw similar gains. March 2022 marked the first month since the pandemic began that American Airlines’ revenue surpassed 2019 levels due to “robust travel demand,” which helped offset rising prices. Similarly, Delta Air Lines “logged the highest bookings in its history” that same month and expects overall sales to recover to as much as 97 percent of 2019 totals.

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The CEOs of both American Airlines and Delta said they expect consumers to prioritize travel despite rising costs, as people have been “cooped up for too long” and are ready for a change of scenery. In Q1, travelers weren’t just splurging on short-haul road trips or domestic flights but also international trips as COVID-19 restrictions winded down in many parts of the world.

However, Tripadvisor reports that inflation is impacting all areas of travel purchases and in a recent survey by Bankrate, seven out of ten U.S. adults are making changes to their summer vacation plans due to high inflation levels.

The U.S. saw airline fare prices rise 18.6 percent in April from a month earlier, the fastest rise on record, according to the latest data from the Labor Department. “Average daily rates across hotel companies in the U.S. were up approximately 37.7 percent in the first quarter of 2022 when compared to the same period in 2021,” according to Skift.

Similarly, the price of flights this summer is also trending higher, as “round trip flights within the U.S. cost $302 per traveler on average, which is three percent higher during the same period pre-pandemic. Long and ultra-long-haul international flights are up to 20 percent higher than 2019, costing on average $797 and $1182, respectively.”

In the earlier months of the year, travelers appeared to be absorbing the higher costs brought on by inflation, airline staff shortages, and other economic conditions. But looking ahead, it remains to be seen how recent interest rate hikes and inflation trends will impact summer travel plans across the country as people remain determined to make up for two years worth of delayed getaways without breaking the bank.