Complicated market dealing travellers a mixed hand

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Some travel costs flying against general inflation trends

Dining out is more expensive than ever. The cost of gas is rising again. And the price of travel — including airfare and hotels — has kept pace. Right?

“I keep hearing the narrative that it’s so expensive to travel,” says Hayley Berg, lead economist at Hopper, a travel booking platform. “In reality we’re seeing lower prices, for domestic trips especially.” Indeed, American Airlines added only 11% more international capacity in the first half of 2023 compared with the same period in 2022, according to its second-quarter financial results, yet revenue increased on those routes by 41%. Clearly, supply hasn’t kept pace with demand, and prices have risen.

All this points to the same conclusion for budget-minded travelers: Airfare is relatively cheap for U.S. travel and expensive for those flying abroad.Lodging prices have fluctuated less dramatically than airfare over the past two years, though current prices overall are elevated over 2019 and 2022 levels. Average daily rates for U.S. hotels rose by 2% year-over-year in August, according to STR, an industry analyst.

Still, car rental prices have much farther to fall before they reach pre-pandemic norms. It now costs 37% more to rent a car than it did in 2019, according to September’s Consumer Price Index.The surge of “revenge travel” in summer 2022 and early 2023 caused prices to spike. Yet these prices peaked in March of this year, according to the NerdWallet travel price index, and have been trending downward ever since.

 

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