Consumers keep traveling despite recession fears and inflation

Business

Francesco Riccardo Iacomino | Moment | Getty Images

Persistent inflation and higher interest rates have strained many household budgets, and consumers are shying away from some purchases such as home improvement projects or apparel. But millions of U.S. consumers aren’t giving up their vacations.

A Deloitte survey from last month found that 50% of respondents planned to take a vacation that includes paid lodging during the summer, up from 46% last year. In a sign of strong demand, the Transportation Security Administration screened close to 10 million people over Memorial Day weekend, slightly more than the same period in pre-pandemic 2019. And American Airlines this week raised its adjusted earnings forecast for this quarter, thanks to strong demand and cheaper fuel.

Many travelers are seeing some relief when they book airline tickets or fill up the tank before a road trip, at least compared with last year.

Prices for airline tickets, for example, were down 0.9% in April from a year ago, according to the latest federal inflation read.

And yet, consumer spending has begun moderating overall but “the categories that are holding up the strongest are the travel categories,” said Jason Gaughan, head of consumer credit card products at Bank of America.

Location is everything

Prices vary wildly depending where travelers are planning to go. A round-trip domestic flight is averaging $306 this summer, down 19% from last year, though still 6% higher than in 2019, according to travel site Hopper.

Capacity constraints due to shortages of aircraft and pilots have affected airline growth and kept fares elevated for months.

International travel has roared back this year as countries around the world lift pandemic restrictions. But there’s still plenty of demand for domestic destinations that dominated travel during the pandemic. That’s especially true because airlines have ramped up capacity to Europe and other international destinations, but bargains are hard to find during the peak late spring and summer months.

Airfare to Europe is averaging $1,167 round trip this summer, up 36% from last year, Hopper data showed.

Lodging also has been more expensive this year, even within the U.S. Hotel occupancy averaged 60.6% from January though April, with per-night average rates of $152.68, according to hotel data firm STR. That’s up from 63% occupancy and average nightly rates of $130.05 during the same period in 2019, and up from 58.4% occupancy and average rates of $141 a night last year.

But there are vast differences between some destinations because of changing travel patterns. Nightly hotel rates for Maui, Hawaii, have increased more than 53% since 2019 to $535.90, the biggest percentage increase in the U.S., according to STR. Meanwhile, hotel rates in the San Jose and Santa Cruz areas of California are down nearly 17% from 2019 to $171.52 as business travel in tech and other sectors still hasn’t recovered to pre-pandemic levels.

CNBC/STR

Money-saving strategies

Consumers looking to save money on travel need to be flexible. Travel experts suggest booking outside of traditional peak periods, like during shoulder season in the fall, though there are trade-offs, such as the possibility for worse weather.

Kobe Guerrero, a Caribbean travel specialist at Raleigh, North Carolina-based agency Trip and Sip Travel, said some customers could find cheaper rates and fares booking in September or October for the northern Caribbean, but that it comes with a risk.

“But then you might have a hurricane ruin your whole vacation,” Guerrero said. She said she would require the buyers to get travel insurance. 

Some travelers are also trying to prepare by booking far ahead.

“Luxury resorts are getting booked two years in advance,” Guerrero said.

Others are giving up some spending elsewhere to pay for trips.

Pervez Virani, an IT project manager, said he and his wife, Zoha Karmali, a property manager, used American Airlines frequent flyer miles to visit New York City over Memorial Day weekend but that they saved money by returning on Wednesday instead of at the end of the weekend.

Virani said the couple had been cooking dinner at home to save on dining out before their trip with their 10-year-old Yorkie, Jordan.

“We’re cutting costs at home,” he said.

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