Dining out is more expensive than ever. The cost of gas is rising again. And the price of travel — including airfare and hotels — has kept pace. Right?
Not exactly. Airfare costs declined by 13% between September 2022 and September 2023, according to September 2023 Consumer Price Index data from the Bureau of Labor Statistics.
Far from being an inflationary force, travel prices have actually helped cool overall prices this year. Yet this seems to fly in the face of many travelers’ expectations.
“I keep hearing the narrative that it’s so expensive to travel,” says Hayley Berg, lead economist at Hopper, a travel booking platform. “In reality we’re seeing lower prices, for domestic trips especially.”
Travel prices have fluctuated so often since 2019 that it makes sense if recent price drops haven’t registered for many travelers. And while airfare has decreased in recent months below 2019 levels, other expenses such as dining out and renting a car remain above their pre-pandemic baseline.
Put simply: It’s been complicated, yet prices are moderating.
INTERNATIONAL FLIGHTS STILL PRICEY
Part of this complication comes from the divergence in price swings for domestic and international airfare. Overseas travelers have seen starkly higher relative prices than those flying within the U.S.
“On the international front, prices for most destinations are higher than pre-pandemic,” Berg says.
Typical roundtrip fares from the U.S. to Europe hit nearly $1,200 this summer, according to Hopper data, which was the highest price in six years. Tickets to Asia reached almost $1,600. And while Berg says prices have moderated since then, they remain high by historical standards. On the flip side, domestic prices are down compared with 2022.
What’s driving this difference in price trends? The supply of aircraft seats is one issue. Although airlines are now operating at 2019 capacity domestically, they have been slower to add international flights, according to Berg.
Indeed, American Airlines added only 11% more international capacity in the first half of 2023 compared with the same period in 2022, according to its second-quarter financial results, yet revenue increased on those routes by 41%. Clearly, supply hasn’t kept pace with demand, and prices have risen.
Another reason airlines have been able to keep international prices high: a relative lack of competition from low-cost airlines.
“If you think back to 2019, it was the heyday of flying to London for $300 with a stopover in Iceland,” Berg says. “Fast forward to today, many of those airlines are not operating or operating at lower capacity.”