Will travel costs change as vaccines roll out?
(NerdWallet) – Industry experts say travel expenses will slowly recover from all-time lows as more people get COVID-19 vaccinations and book long-deferred trips.
Air traffic collapsed around this time last year in the United States. In April 2020, 95% fewer travelers passed the checkpoints of the Transportation Security Administration than in April 2019. This lower demand led to a corresponding drop in airfares.
The average cost of a domestic round-trip ticket was down 28% to $ 259 in the second quarter of 2020 from the same period in 2019, according to the Bureau of Transportation Statistics. At the time, few travelers monitored these prices because so few were booking flights. But now that COVID-19 vaccinations open up the possibility of traveling to see millions more Americans each week, prices will change again.
If you are one of those potential travelers, experts cautiously advise booking your trip soon. Much remains uncertain, but prices are unlikely to return to 2020 levels.
Flight demand should start
Experts, who track travel offers and consumer interest, say demand for airplane seats is likely to spike, which will drive prices back up.
Domestic flight prices are expected to increase by 4% to 5% each month through the summer of 2021, said Adit Damodaran, an economist at Hopper, a travel search tool. “Much of it is based on the introduction of vaccination.”
And this increased demand could be accompanied by a decrease in supply. Airlines cut their routes and flight frequencies in 2020, and parked planes and vacation staff. Capacity may be slow to return to pre-pandemic levels even as bookings pick up.
“The airlines are using so much cash. So we see that they are slowly expanding the offer,” said Jesse Neugarten, who founded the flight deal newsletter Dollar Flight Club. “If we have to stop the trip again, they don’t want to end up in a similar situation to 2020.”
Hotel prices can slowly rise
Hotel prices have also fallen during the pandemic, albeit not as uniformly. Room rates in New York City fell 37% year-over-year in February, according to Hopper, while small-town hotels saw only a 5% decrease. This reflects a larger exodus from crowded cities during the pandemic. This pattern could be reversed if vaccinated travelers return to metropolitan areas later in 2021 and drive prices higher.
However, tourism only accounts for part of the demand for travel. Business travel that virtually stopped during the pandemic is likely to return more slowly. This could keep hotel prices down through 2021, especially in large cities. It could also suppress airfares a bit, even if more tourists soar into the sky.
The flexibility in booking is expected to continue
Neugarten, who pursues air agreements, points to a changing travel landscape that goes beyond supply and demand. The pandemic changed the way airlines and hotels deal with flexibility, and many eliminated change and cancellation fees altogether. This, in turn, changed the logic of how and when to book trips.
“I will not book at the last minute because I can get a good deal if I book three months in advance,” said Neugarten. “Because of the flexibility, there are many incentives to book a deal now.”
In addition, the travel trends that characterize a typical year remain in flux. Memorial Day and July 4th travel could follow unusual trends, particularly with regard to when to book.
“The traditional events of the year when traveling just don’t happen, so there isn’t the same ‘best booking time’ that we would normally see,” said Mark Crossey, travel expert at Skyscanner, a flight search tool.
And then there is the question of international travel. There are limited tourists in many countries, especially from the United States. These restrictions may persist even as more travelers receive vaccinations.
“We don’t expect a price increase for international flights until May,” said Damodaran. And prices are unlikely to change as countries update their policies one by one. Damodaran noted that Hopper sees the greatest interest in destinations in the Caribbean and Latin America.
There is a lot of uncertainty. Hiccups in vaccine distribution could dampen prices, as could a surge in COVID-19 variants. Flexible booking options, while good for customers, can lead to bulk rebooking later in the year. And volatile oil markets could affect airfares as in normal years.
Despite these unknowns, experts remain cautiously confident that those looking to book a trip for 2021 should do so sooner rather than later. Greater flexibility reduces the risk of plan changes and increased demand for travel is unlikely to drive prices below current levels.
“I booked a one-way flight to Portugal for $ 109 in July,” says Neugarten. “We’ll see if I can get the vaccination first. If not, I’ll postpone it. “
This article was written by NerdWallet and originally published by The Associated Press.
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Sam Kemmis writes for NerdWallet. Email: [email protected] Twitter: @samsambutdif.
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