Inflation is a concept where the purchasing power of a currency goes down over time. The rise in prices is usually seen as a percentage based on a basket of goods and services in the economy. When currency’s value erodes, prices go up. Your money buys fewer goods and services. Most economists think sustained inflation happens because the supply of money is outpacing economic growth.
The United States and the world are currently experiencing record inflation, and it’s affecting things we think about more commonly, like food and energy. Inflation also affects travel, so if you’re planning a trip this summer, you’ll want to look for vacation deals to combat the effects.
Prices rose an average of 8.5% over the past 12 months ending in March of this year, according to the U.S. Department of Labor.
Below, we explore more about the effects of inflation on travel and what you might expect with prices.
How Does Inflation Affect Travel Costs?
According to current data, as part of the inflation, airline fares were up by 10.7% on a monthly basis. Fares were almost 24% higher than last year. There are two key reasons for this. The first is the high fuel costs, and the second is increased travel demand following two years of the pandemic.
Gas prices rose 18.3% month-on-month in March.
Some airlines are reporting the highest ticket sales they’ve ever had, and in the United States, air passenger traffic has averaged around 89% of the pre-pandemic levels since February, according to TSA data.
Prices for jet fuel have gone up more than 30% recently, and carriers are passing those costs onto customers. Some fares have gone up by as much as 100% in comparison to last year.
Hotel rooms have gone up more than 25% in price over the past years, rental cars have soared more than 23%, and restaurant prices are up nearly 7%.
The Travel Price Index looks at the price of travel in the United States and, based on CPI data, was up 16.7% year over year in February. It was more than 12% higher than in February 2019.
Airline Prices
While airline prices are up over the prices during the height of the pandemic, there is a bit of good news for travelers. Airfares haven’t fully recovered. For example, the cost of airfare in 2022 was 19% lower than the previous 10-year average.
Even in the time leading up to 2020, airfares had been trending somewhat downward, and the 10-year price high was in 2013 when the average cost of airfare was around 30% higher than the prices in February 2022.
Volatility in Lodging Prices
Hotel pricing is consistently higher in the summer months than in February. The price of any type of lodging away from home, including hotels, saw one of the biggest pricing category swings throughout the pandemic. In December 2020, the average prices of hotels were at their lowest levels since December 2013.
In July 2021, prices had gone up 47%, reaching their highest level in the Consumer Price Index.
Now, hotel prices have gone down slightly from all-time highs, but based on the effects of seasonality on these prices, we might expect them to go up.
Unfortunately, while they’re raising their prices, a lot of hotels are simultaneously cutting out amenities like room service and housekeeping. The hospitality industry is blaming the reduced amenities on high demand, supply chain issues, and staffing shortages.
Rental Cars
Rental cars have seen some of the most dramatic and soaring prices. In summer 2021, people renting cars especially saw these effects. The prices of rental cars reached an all-time high in July of last year, and they’ve recovered slightly, but still remain significantly more expensive than the past 10-year average.
Restaurants
Food prices go up every year, and that was true even during the pandemic when prices for other things related to travel were declining.
The cost of getting a meal or food away from home was up almost 7% in February 2022 compared to 2021. These costs were nearly 11% higher than in February 2020.
Will Consumers Change Plans?
A CNBC study done in conjunction with Acorns Invest and conducted by Momentive found in April that 40% of U.S. adults said they would cancel a trip or vacation if they saw consumer prices continue to rise.
You don’t necessarily have the skip vacation altogether this year if you’re worried about the high prices.
There are other things you can do to reduce some of the impact of inflation on your travel budget.
Saving Money On Your Summer Vacation
There are some key things you can do to save this summer.
One is to think about exploring places like national parks. For example, the Great Smoky Mountains National Park has seen record numbers of visitors since the start of the pandemic. You can pack your own food and do free activities like hiking.
If you’re going to fly, you should book domestic flights at least six weeks in advance to get the best deals. For international flights, plan to book a minimum of four months out.
Another way to save on airfare might be to plan your trip for September or October rather than the height of the summer travel season.
You can save on airfare and hotels if you set up price alerts, and you want to be flexible on the day you fly to save money. For domestic flights, prices are, on average, 13% cheaper on Wednesdays. They’re 15% more expensive on Sundays compared to the national average.
Consider booking a house or apartment rather than a hotel. That way, you aren’t paying for amenities you might not even get access to anyway, and you can make your own meals and coffee.
Going to a place that has good public transportation options can help you skip rental car costs.
When you’re traveling, you might also enjoy more local street food or inexpensive cafes rather than the higher-priced eateries in your destination.