Will travel costs change as vaccines roll out?
(NerdWallet) – Travel costs will slowly recover from historically low levels as more people receive COVID-19 vaccinations and book long-distance travel, according to industry experts.
This time last year, air traffic in the US fell sharply, with 95% fewer passengers passing through Transportation Security Service checkpoints in April 2020 compared to April 2019. This reduced demand led to a corresponding reduction in prices of air fares.
The average cost of a return home ticket in the second quarter of 2020 fell 28% from the same period in 2019, to $ 259, according to the Bureau of Transportation Statistics. Few travelers were watching these prices at that time, as so few booked flights. But now, with COVID-19 vaccines opening the door to millions more Americans traveling each week, prices are back on track.
If you are one of these aspiring travelers, experts carefully advise you to book your trip soon. Many remain uncertain, but prices are unlikely to return to 2020 levels.
Flight demand is set to take off
Experts monitoring travel deals and consumer interest say demand for airline seats is likely to increase, raising prices.
Domestic airfare prices are expected to rise 4% -5% each month until the summer of 2021, said Adit Damodaran, an economist with Hopper, a travel search tool. “Many of them are based on the development of vaccination.”
And this increased demand can be combined with reduced supply. Airlines reduced routes and flight frequency in 2020, aircraft parking and staff. They may delay regaining capacity to pre-pandemic levels, even when bookings increase steam.
“Airlines are burning so much cash, so what we are seeing is that they are slowly increasing supply,” said Jesse Neugarten, who founded the Dollar Flight Club Flight Agreement newsletter. caught in a similar situation as in 2020. “
Hotel prices may increase slowly
Hotel prices have also dropped during the pandemic, though not as evenly. Room rates in New York fell 37 percent year-on-year in February, according to Hopper, while hotels in small towns fell just 5 percent. This reflects a larger outflow from busy cities during the pandemic. This pattern could be reversed as vaccinated travelers return to metropolitan areas later in 2021, raising prices.
But tourism represents only a fraction of the travel demand. Business trips, which have stopped during the pandemic, will probably be slower to return. This could keep hotel prices low throughout 2021, especially in large cities. It could also slightly reduce airfare, even when more tourists arrive in the sky.
Booking flexibility is likely to continue
Neugarten, which monitors flight offers, points to a changing travel landscape that extends beyond supply and demand estimates. The pandemic has changed the way airlines and hotels handle flexibility, with many eliminating change and cancellation fees altogether. This, in turn, changed the logic of how and when to book travel.
“I’m not going to book at the last minute because I can get a lot if I book three months in advance,” Neugarten said. “There are many incentives to close a deal now because of the flexibility.”
In addition, travel trends that mark a typical year remain ongoing. Memorial Day and the fourth trip in July could follow unusual trends, especially when it comes to booking.
“Traditional travel events of the year just don’t happen, so there’s not the same ‘best booking time’ we’d normally see,” said Mark Crossey, travel expert for Skyscanner, a flight search tool.
And then there is the issue of international travel. Many countries have limited tourists, especially from the US, and these restrictions may remain even when more travelers are vaccinated.
“We do not expect an increase in international airfare prices until May,” Damodarn said. And variable prices are unlikely to be geographically uniform as countries update their policies one by one. Damodaran noted that Hopper sees a keen interest in Caribbean and Latin American destinations.
Uncertainties abound. Vaccine distribution hiccups could lower prices, as could increases in COVID-19 variants. Flexible booking options, while good for customers, could lead to bulk bookings later in the year. And volatile oil markets could affect air fares, as they do in normal years.
Despite these unknowns, experts remain cautiously convinced that those wishing to book a 2021 trip should do so sooner rather than later. Greater flexibility reduces the risk of changing plans, and increased travel demand is unlikely to drive prices below current levels.
“I booked a one-way (flight) to Portugal in July for $ 109,” says Neugarten. “We will see if I have been vaccinated before. If not, I will push 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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