Devin Ryder, CFA
According to the Hopper’s Summer 2022 Travel Guide, more than half of Americans plan to travel this summer for fun, indicating they are eager to get back on the road. Most tourists going on vacation or visiting family and friends – 24% are traveling for the first time since the COVID-19 outbreak. With soaring airfare and gas costs, more than half of Americans planning to travel for pleasure this summer expect to spend more than $1,000.
Airfare prices are rising
The cost of domestic air travel has increased by more than 34% compared to last year and now averages $383 per round trip. Summer airfare is approaching a 5-year high, driven by rising jet fuel prices, rising demand and a decline in overall capacity compared to 2019.
Meanwhile, international airfares are up just 2.5% from 2019, averaging $912 round trip. In particular, the cost of air tickets to the most popular destinations in Europe will cost tourists an average of $868, which has not changed compared to last year; however, airfare to closer destinations in Mexico and Central America and the Caribbean increased by 8% and 10%, respectively.
Jet fuel prices, such as gasoline and diesel, fluctuate with crude oil prices. In February, American Airlines (AAL) said the price of jet fuel increased from $1.48 in 2020 to $2.04 in 2021; that’s more than a third. At the time, it was estimated that each steady one-cent increase in the price per gallon would add nearly $40 million to his fuel bill in 2022. American estimates that it paid between $2.80 and $2.85 a gallon in the first quarter of this year. Consumers do not appear to be concerned about rising fuel prices and the resulting higher airfares. Ed Bastian, CEO of Delta Air Lines (DAL), said on Wednesday that despite 10% fewer tickets, March was Delta’s highest sales month ever, surpassing the record set in 2019.
Demand for summer travel
Demand for summer travel continues to grow at a much higher rate than in previous years, Hopper said, putting even more upward pressure on ticket prices. Demand for domestic travel search has grown 50% faster this summer than in the first four months of 2019, with the biggest acceleration since the end of the micron wave of COVID-19 in February. Demand is forecast to remain strong until mid-summer, when it begins to decline seasonally in late August and September.
In fact, the summer of 2022 has been dubbed the summer of “revenge travel,” a term to describe the urge to travel after long shutdowns and restrictions due to the pandemic. Americans are spending money on “revenge travel” to make up for lost time after two years of pandemic cancellations, indulging themselves in more expensive tickets, better hotels and longer stays. As such, travel remains a top priority for discretionary spending by consumers who are fed up with staying at home. As a result, “revenge travelers” are “more likely to travel to exotic destinations, spend more money to…