Price Check: Labor Day Holiday Offers Opportunity for Travel Costs Assessment
As Labor Day Weekend approaches and many families seek to enjoy the final few weeks of summer vacation, lets take a look at where fuel costs for transportation are impacting the cost of travel this Summer compared to recent years.
Travel by Air
Starting with air travel, Summer 2022 saw the highest overall travel prices on record with a rise of 42.9% in overall airfare from Summer 2021.
Thankfully, Summer 2023 has given travelers a reprieve from the sky-high prices. According to one report, prices last month were down 19% from their rate in July 2022. The latest Consumer Price Index (CPI) data shows that prices are trending more toward their pre-pandemic state than they are to last year’s numbers.
Since the beginning of the COVID-19 Pandemic, airlines have struggled with mounting debt and an inability to return to a state of profitability. Many airlines do not have the staff or pilots to make some trips happen, and the global rise in fuel prices burdens others. According to IATA, the cost of jet fuel has increased by nearly 150% in the last year. One factor for stubbornly high flight costs is due to an increase in demand. In the post-pandemic economy, there has been a surge in international and domestic travel, and airlines have yet to be able to keep up with this rising demand. And, since jet fuel comes from the same part of the oil barrel as diesel fuel, the loss of Russian barrels to the US especially impacting the East coast of the US and to the world market, has increased the cost of both diesel and jet fuel.
Travel by Ground Transportation
Gasoline pricing also affects the travel market and has been a significant indicator of inflation rates. According to AAA gas price tracking, as of August 15th, the average regular gas price in the U.S. is $3.862. Compared with the highest gasoline prices on record (June 2022, where the average was $5.006), there has been a 22.8% decline in prices. This bodes well for the remainder of the summer. When comparing today’s costs with this time last year, a gallon of gasoline is about $0.09 cheaper, according to the same AAA data. A quick political reminder: since drivers reliably pass by numerous stations almost every day, gas prices are often seen as one of the most visible indicators voters use to assess a president’s handling of the economy (even though influence from the executive branch is questionable); a 2024 priority of the Biden Administration will be to strive to continue the decline in overall gasoline costs.
Much like air travel, several factors drive the sustained high prices, such as oil production cuts, China reopening its economy after COVID restrictions have been lifted, rising general inflation rates, and high energy costs associated with the war in Ukraine. Each of these factors presents an uncertain future for gas pricing, particularly with OPEC announcing on June 4th that it will extend production cuts by 1.4 million barrels per day through the end of 2024. Additionally, the war in Ukraine shows no signs of coming to an end, ensuring that Russian oil will continue to be banned from entering the U.S.
This summer has also ushered in waves of extreme heat, which have significantly wounded refineries' ability to produce gasoline at total capacity. As of July, gasoline production fell to 9.5 million barrels per day.
Pricing Breakdown from 2022 to 2023
Although the prices of overall airfare are lower compared to last summer, the price of every other aspect of traveling has increased. Gas prices, renting cars, lodging, and dining out have all increased this summer. These hallmarks of inflation have not gone unnoticed, but have also not deterred families from taking their summer vacation after two years of strict COVID precautions. Here is a breakdown of price differences from Summer 2022 to Summer 2023 in five different areas of travel as well as how they compare to pre-pandemic pricing (2019).
Airfare
July 2023 prices vs. July 2022 prices are down 9%
July 2023 prices vs. July 2019 prices are down 5.6%
Gasoline
June 2023 prices vs. June 2022 prices are down 22.8%
July 2023 prices vs. July 2019 prices are up 2.9%
Car Rentals
July 2023 prices vs. July 2022 prices are up 5.7%
July 2023 prices vs. July 2019 prices are up 37.2%
Hotels and Motels
July 2023 prices vs. July 2022 prices are down 0.8%
July 2023 vs. July 2019 prices are up 13.6%
Food Away from Home
July 2023 prices vs. Jun 2022 prices are up 0.29%
July 2023 prices vs. July 2019 prices are up 24.6%
Take Aways
The two largest jumps from pre-pandemic rates are car rentals and food pricing. The record high for car rental pricing was in July of 2021, and now seems to be declining but are still far from affordable. Food costs have risen consistently with inflation, and summer is no exception.
Although prices have barely shifted from this summer to last, we are still almost 25% above what food costs were back in 2019. Summer 2023 has been the most affordable summer to travel since the Pandemic, but prices have a long way to go before they stabilize at their 2019 levels.
The future of air travel prices maintaining their relative drop is dependent on the upcoming hurricane season, where any damage to refineries could spike jet fuel prices and leave people struggling around the holiday travel season. Much like gas, travel prices have been one of the markers of inflation consumers take into account consistently.