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Summer travel kicked off with a bang in 2024, with record Memorial Day travel in the skies and on the roads, and despite some higher prices because of inflation, Americans are not putting off their vacations. 

AAA said a record 38.4 million drivers hit the road for the unofficial start of summer, and the Transportation Security Administration’s passenger travel numbers showed a record 2.9 million people passed through the nation’s airports on May 24, the Friday ahead of Memorial Day. That pace continued through June, with several days seeing nearly 3 million passengers. 

There is some good news for late summer travelers: crude oil and gasoline prices are lower, making it cheaper to drive to a last-minute destination than it was earlier this year. Further, airline tickets are down compared to 2023’s prices as well.

The news can’t come soon enough for vacationers, who have been feeling the pinch of inflation eating into their leisure budgets.

Keeping Travel in the Budget

Seth Borko, head of research at travel news organization, Skift, says the firm’s first quarter U.S. Travel Trends report found that 67% of U.S. travelers had their vacation plans impacted by higher prices. The report is a quarterly survey of 1,000 American travelers.

“U.S. travelers looked to a number of tactics to offset these costs. Most commonly, Americans used alternative transportation to flying or picked a cheaper flight option. Many also spent less on in-destination expenses when traveling such as finding cheaper food or activity choices,” Borko says.

Despite higher prices, Americans still want to experience those summer travel vibes, as very few people canceled their trips outright because of costs. 

“This speaks to a strong underlying demand for travel this summer despite all of the challenges,” he says, noting the survey found that half of all American travelers intend to increase their travel spend over the next twelve months, compared to just 16% planning to cut their vacation budgets.

Sean O’Neill, senior hospitality editor at Skift, also pointed to earnings calls from U.S. hotel operators which show that luxury hotels are seeing higher demand, even with their higher prices, than more affordably priced lodgings. 

“Wyndham and Choice Hotels highlighted that their economy brand hotels were experiencing softer performance year-over-year compared to their midscale and upscale brands. In contrast, Marriott, Hilton, and Hyatt are mostly premium brands so they aren't exposed to weakness from middle-class vacationers,” O’Neill says.

Flight Costs Moderate

Skift analyzed U.S. Bureau of Labor Statistics city airfare price data, information the department gathers as part of its inflation gauge. 

Borko says domestic airfare prices heading into the summer were 5.8% lower than the same time last year, citing U.S. Bureau of Labor Statistics city airfare price data Skift analyzed. 

“This is part of a trend of ticket-price declines that has been happening for the last year, making airfares one of the few pockets of the U.S. economy experiencing sustained deflation (as opposed to lower inflation),” he says.

Online travel agent Hopper says domestic airfare during the summer is averaging about $305 per ticket, and noted this is the first time since 2020 that airfare dropped compared to the previous year.  

Airfare to Europe is down 8% versus 2023, but up 15% compared to 2019. Flight prices to Asia are up 45% versus 2019 as carriers expand capacity. Trips to Mexico and Central America are down 8% versus 2023, but remain up 6% compared to 2019, Hopper said.

Borko also noted U.S. airlines are scheduled to operate about 5.4% more domestic flights this summer than they did last year, citing data from airline planner Cirium Diio Mi.

“This extra capacity is a double-edged sword for the industry,” he says. “On the one hand it does speak to an anticipation for a robust summer by airline management teams. But airlines often overestimate passengers and grow supply faster than demand. This excess capacity is likely what is keeping domestic airline fares low relative to other products and services.”

Gasoline Prices Down

Gas prices at the end of June were down from the month prior, with the national average around $3.56 a gallon, according to Energy Information Administration data.

WTI Crude Oil futures prices moved toward 2024 peaks entering July as summer demand picked up ahead of the Fourth of July holiday, and geopolitical concerns resurfaced. Peter McNally, global head of sector analysis at Third Bridge, says summer is often a seasonally stronger time for energy prices because of travel demand, and prices could be underpinned as gasoline inventory is at the lower end of their five-year averages. 

“There's been zero disruptions to crude oil supply that's had any lasting impact,” McNally says, although he adds that some geopolitical circumstances remain a background issue.

As gasoline demand has increased during the summer season, so has interest among gasoline traders looking to manage risk around probabilities of a sudden price shift. The RBOB Gasoline futures contract at CME Group saw open interest – or the number of open, unsettled positions – move to its highest point in more than three years in April, and interest has remained high since.

Fundamentals for the energy markets look positive with generally strong demand and a consumer that still wants to travel, says McNally. OPEC in June announced a plan to keep production cuts in place through 2025.

Refining capacity for both gasoline and jet fuel have increased over the past year, and there’s been investment in the sector. “The balance sheet of the industry is good,” he says.

The wild cards for energy prices will remain the possibility of refinery outages because of possible adverse weather impacts, and Chinese demand, as the Asian nation’s economic growth has remained lackluster the past two years.

Overall, McNally says there should be decent summer demand for energy and fuel.

“The U.S. economy has continued to surprise people to the upside for the most part. Corporate earnings have been healthy mostly. There has been some inflation in some areas, but fuel prices, aren't up any kind of meaningful amount.”



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