Hotel prices, airfare decline as travel demand cools

Consumer prices for hotels, motels and other lodging dropped nearly 5% in November from October, according to the latest government inflation report, a sign that soaring travel demand has lost some momentum from the summer.

Airfares also fell month to month, by 0.6%. Still, the price index for hotels, motels and lodging was 3% higher than it was a year ago, while airfares were 36% higher.

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The cooldown comes in a year where the travel industry enjoyed major tailwinds after a turbulent couple of years due to Covid. Pent-up travel demand even began to encroach on retail’s momentum as pandemic shoppers turned into post-pandemic travelers.

But with a possible recession on the horizon, the price declines for travel in November could be a harbinger of a further drop in demand.

The travel industry has seen demand taper since a summer surge. JetBlue said Tuesday in a regulatory filing that the strong last-minute demand it anticipated for December in its previous financial outlook “has materialized below expectations.” The airline’s updated outlook, which also includes the impact from Hurricane Nicole in November, sets its fourth-quarter unit revenue growth “at the low-end of its prior guidance” with a 15% to 19% over 2019.

United Airlines CEO Scott Kirby, however, said that travel demand and revenue remains strong while business travel has “plateaued.”

Even as travel demand cools, revenues in the industry have remained stable due to higher prices. Flight bookings over Thanksgiving were down 7% compared to 2019, but higher fares allowed revenue to increase by 3%, according to Adobe data.