How inflation impacts summer travel: Consumer getting 'savvier,' CEO says

It has been more than two years since Americans canceled their summer travel plans because of the coronavirus pandemic and the associated lockdowns, but now that people are traveling again consumers are faced with another challenge – soaring inflation. 

The CEOS of two travel companies told Fox News Digital that while the economic backdrop is shifting consumer behavior, demand for summer travel is still incredibly strong.

Priceline CEO Brett Keller said even though inflation sits near 40-year highs, "travel is robust" and this summer is still going to experience "a busy travel season." 

He noted that "the prices across all of the categories of travel, whether it’s airline tickets, hotels, rental cars, etc. have gone up so dramatically over the last few months that consumers are having to rethink the type of travel they are willing to take."

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"They are trading down their behavior to still enjoy travel," he argued. 

Keller provided the insight as the latest inflation data provided by the Labor Department revealed that inflation cooled on an annual basis for the first time in months in April, but rose more than expected.  

The Labor Department said last month that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 8.3% in April from a year ago, below the 8.5% year-over-year surge recorded in March. Prices jumped 0.3% in the one-month period from March.

Those figures were both higher than the 8.1% headline figure and 0.2% monthly gain forecast by Refinitiv economists.

According to the data, airline fares surged as more people began to travel with prices soaring 18.6% in the one-month period and 33.3% over the past year, marking the steepest one-month increase since the inception of the report in 1963.

Consumers hoping to take a driving trip this summer are faced with record high gas prices. 

On Friday, the national average for a gallon of gas was $4.76, a fresh record, according to AAA.  

Keller warned that if prices continue to soar over the next few months "consumers are going to make tradeoffs that may involve not taking certain types of trips at all." 

The Points Guy founder and CEO Brian Kelly also said that he believes "prices will continue to soar throughout the summer."

He noted that despite the inflationary backdrop, "the consumer is very aggressive when it comes to booking travel and the numbers show it." 

Hayley Berg, lead economist at mobile travel app Hopper, said demand for summer travel is still "strong," noting that "demand has grown 50% faster since the start of the year compared to the first four months of 2019."

Berg noted that although prices are higher this summer, over the last three weeks Hopper has seen domestic airfare prices flatten out after climbing steadily the past few months. 

Domestic airfare is currently averaging $404 round-trip, up 40% from $288 this time last year and 26% from $322 round-trip in 2019, according to Hopper, which noted that international airfare is also seeing a 35% boost from the same time last year and 17% from 2019. 

Hotels are currently averaging $204 a night nationally, which is 34% higher compared to the same time last year, the data further revealed. 

Kelly noted, "the number one thing consumers are concerned about is now the cost of travel, not COVID for the first time in two years." 

"People are just having to be more savvy," he added. 

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He also said more people have been booking all-inclusive vacations this summer "so they can keep at least one aspect of the trip under control" and recommended going where the U.S. dollar is strong as a way "to battle inflation."  

"Now consumers are paying $900 a night for normal hotel rooms in Miami when you can go to Portugal for the same price as a flight to Miami and the U.S. dollar goes a lot further," Kelly said. 

Hopper noted that demand for summer 2022 travel is primarily for domestic destinations, with 65% of bookings to destinations in the United States, which is an increase of 16% compared to 2019.

Keller said there hasn’t been hesitancy to pay higher prices for flights yet, but warned that the "sticker shock" could start to settle in. 

As it pertains to road trips, he noted that soaring gas prices are "starting to impact the distance that people are willing to travel to a hotel or to a destination." 

"We’ve seen the average distance that people are traveling shrink over the last number of weeks here because of the gas price impact," he added. 

Keller noted that travelers used to drive an average of 175 to 200 miles from their homes, but now with higher gas and hotel prices, the average has decreased to about 160 to 170 miles.

"Another trend is people are trading down in hotel quality and moving from the higher star category to lower categories in order to still take the trip, but not pay the premium that’s required to move up into some of these higher-class hotels," he continued. 

According to Keller, summer travel hotspots being booked on the platform include Las Vegas and Orlando "because there is more flight capacity, which means lower airline ticket prices and there is very high hotel capacity … and so consumers are able to find great bargains compared to other higher-priced markets." 

He also noted that "some of the big cities are starting to see a nice return in demand," including New York City, Miami, and Chicago.  

Ticker	Security	Last	Change	Change %
BKNG	BOOKING HOLDINGS INC.	3,502.48	-15.04	-0.43%

He pointed out that internationally, demand for European travel has been strong, especially in London, Paris, Rome and Barcelona. 

"When people are looking for value on the international side, they are staying closer to home because there is a lot of value flying to places like Mexico and the Caribbean," Keller said. 

Data as of June 1 from Expedia sent to Fox News Digital confirms travel trends Keller noted based on Priceline data.

According to Expedia, top destinations for summer 2022 include New York City, Las Vegas, Los Angeles, Orlando, Cancun, Chicago, Seattle, Denver, Boston and San Francisco in that order. 

The Points Guy noted that amid the current inflationary environment, consumers can save by flying midweek, using Google Flights to get the best deals, and setting alerts to see when airfares drop. 

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He stressed that "when you see a good airfare, book it right away," especially because he predicts "prices will continue to soar throughout the summer."

When taking a road trip, Kelly recommended planning out where to stop and get gas "based on the cheapest prices" given prices and taxes vary dramatically by state.