Why Is Travel So Expensive Right Now?

If you've searched for flights lately, you may have noticed a bit of an increase in fares. Planning that summer resort stay? Your resort might already be sold out, and if it's not, the room rate is likely sky-high. Rental cars? Forget about it! So, what's going on with prices right now that's causing things to feel so darn expensive? As it turns out, there are several factors at play right that are affecting consumer pricing. Let's dig into the details.

First, About Inflation

You've probably heard a lot about inflation in the news, and travel is by no means exempt from the price increases affecting consumers all over the country. Just this week, the government reported an 8.5% increase in prices of goods in March 2022 compared to a year ago (airfares are up over 10%).

Inflation doesn't just "happen", there are compounding factors that affect pricing, including energy prices, labor prices, supply challenges, and demand changes. Unfortunately all of these factors are at play right now, negatively affecting that summer vacay.

War (And Energy)

The truly devastating news coming out of Ukraine is affecting travel prices, albeit a bit indirectly. Russia, one side of the war, is a major energy producer for Europe and other parts of the world, producing about 10% of the world's supply of oil. Since sanctions have been imposed on Russia, the oil market has responded accordingly, with oil prices spiking above $100. As oil creates jet fuel, airlines' number one expense, the airlines have to pay more to get you from point A to point B.

U.S. airlines used over 13 billion gallons of jet fuel last year alone! This is one reason that your flight is more expensive this summer. You'll also see the war affect food prices at your destination, as Russia and Ukraine are said to account for almost 10% of the world's calorie production since they're both major wheat exporters.

Labor Shortages

Unfortunately, airlines can't operate all the flights they'd like to, even with high fuel prices. At the beginning of the pandemic, many employees were furloughed across all industries. Well, many of those employees moved on and have never returned. Just this week, Jetblue announced they're cutting their summer schedule due to "staffing issues."

With fewer flights being operated by airlines, that means fewer seats for the number of people that would like to fly from point A to point B, causing an increase in prices. Unfortunately, there doesn't seem to be much hope in sight for a solution to this problem, which could potentially be an issue for months.

Competition

This is an issue that I've noticed in my own summer travel planning to Europe. Before the pandemic, we had several low-cost carriers flying transatlantic, driving down prices across the board because competition is usually always good for consumer prices. Unfortunately, Norwegian Air and WOW Air are long gone, which leaves less competition for the "big guys" who are able to charge a higher price, because they can.

Unless you'd like to travel by ocean liner, you have to fly to get to Europe. Domestically, we're seeing the mergers of the past ten years give flyers less choice in who they can fly with, and with a pending merger between Frontier and Spirit (or JetBlue?), it's not getting more competitive out there.

Demand

An increase in demand is probably affecting prices the most out of all of the factors I've detailed. People want to travel right now, badly. The pandemic is winding down for many, and they'd like to get on with their lives, including traveling to places that they couldn't over the last two years. So, places like Orlando, Cancun, Hawaii, and Las Vegas are seeing hotel prices at all-time highs. Hotels know they can charge more than what they had in the past because people will pay it! The same goes for award travel, as we've seen Marriott and Hyatt change their hotel pricing, resulting in award price increases. Until that demand wanes, high prices are here to stay.

How are high prices affecting your travels? Let us know!