Why the skyrocketing price of air travel in the summer, hotel prices will not slow down

Travel shows no signs of abating this summer, as both demand and prices are expected to remain high.

“There is still a lot of pent-up demand going back into the pandemic,” Reservation holdings CEO Glenn Fogle said on “Squawk on the Street” last week. “They’ve got a lot of savings; they want to spend it.”

Fogel, whose company operates several travel price aggregators including Booking.com, Priceline.com and Kayak.com, said the company saw a 26% increase in room nights in January compared to the same month in 2019. He also cited TSA numbers Travel at checkpoints, which is now within a few percentage points of the number of travelers seen in 2019.

This demand has kept prices high, Vogel said, referring to recent trips he has taken.

“I was staying in a hotel in New York City Thursday and Friday night, and I said, ‘Wow, that’s a lot of money,'” he said. “I was in Miami earlier in the week, and it’s expensive, but people are willing to spend it.”

Airline prices show no signs of abating either. Airfare prices rose 17.7% year-over-year in March, according to the latest US Bureau of Labor Statistics data, even as other consumer prices fell.

“[Consumers] They went three years without having the experiences they wanted, including last summer,” Delta Airlines CEO Ed Bastian said on “Squawk Box” earlier this week. “If you think about last summer, we were still in a situation where people had to get tested to go back into the country and other places, and there was a lot of uncertainty around Covid – we went through everything I think.”

Even as the airline’s stock was hurt by rising costs it faced related to fuel and labor, during Delta’s earnings call with analysts on April 13, company president Glenn Hauenstein said the airline was seeing “record advance bookings for the summer” with the month of March. Cash advance bookings are up nearly 20% compared to 2019 levels.

While domestic flights are doing well, “international flights are clearly where people are trying to regain experiences that they’ve lost over the last several years,” Bastian said.

People don’t hold back from spending on travel

Travelers walk toward the gates of LaGuardia Airport in New York City, April 6, 2023.

Eduardo Munoz | Reuters

Expectations of continued consumer spending have been common among travel industry firms in recent quarters, though companies and executives in nearly every other sector are waving warning signs that people may hold back.

Amazon CEO Andy Jassy said last week on “Squawk Box” that consumers are becoming “more bargain-conscious” as they try to save money. “Consumers are spending, but they’re more careful about what they’re spending on, and we’re seeing a lot of circulation coming down the price point,” he said.

A recent CNBC Financial Trust Poll, conducted in partnership with Momentive, found that most Americans live paycheck to paycheck. About 70% of Americans admit to being stressed about their personal finances these days, and a majority — 52% — of US adults said their financial stress had increased since before the Covid-19 pandemic began in March 2020, according to the poll.

Fogel noted that amid consumer concerns, recent issues such as instability in the banking sector “can cause people to worry about what they’re going to spend or not.”

However, he said that “in the long term, travel will continue to expand better than GDP.”

In his view, Bastien said, consumers are “moving away from certain markets or shifting out of goods and into the world of services.”

“We are in a multi-year recovery from the pandemic and it will be much higher than anything anyone expected,” Bastien said.

Delta CEO Ed Bastian on First Quarter Earnings: We're Gearing Up for a Strong Travel Season

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