Travel costs are up but travelers aren’t canceling their plans yet

Summer travel talk sure isn’t what it used to be.

Rather than sun, sand and surf, many travel discussions now center on inflation, rising fuel costs and flight cancellations, a situation which could derail a much-needed 2022 summer travel comeback.

Travel conversations on Twitter decreased 75% from April to May, while discussions related to gas prices and travel — half of which were negative — climbed 680% on the website from the winter months into the spring, according to the social media analytics company Sprout Social.

Yet despite the potential problems ahead, the outlook for summer travel remains strong, said industry insiders, with many travelers saying they’re concerned but undeterred about their upcoming plans.

No, said James Thornton, CEO of Intrepid Travel, a Melbourne-based travel company which focuses on small group adventure vacations around the globe.

He said the company hasn’t seen higher cancellation rates this summer.

“In the last few months, global concerns about shortages, sanctions and higher costs have had economists sounding alarms,” said Thornton. “Despite the rise in costs, travel bookings have more than doubled.”

David Mann, chief economist at the Mastercard Economics Institute, said higher prices won’t stop travelers this summer, especially in parts of the world that have recently reopened, such as Asia-Pacific.

“Think of it literally like a pressure cooker where you are lifting up the lid and the steam is coming out hot,” he told CNBC’s “Squawk Box Asia” in May. Inflation “does matter, but that’s only after we’ve had some of that release of the pent-up demand.”

A new survey indicates Singaporeans, for example, aren’t willing to sacrifice their summer travel plans in the face of rising costs. Despite 77% indicating they were either “extremely” or “very” concerned about rising costs, nearly 40% more people plan to travel this summer than in the last, according to a Tripadvisor Travel Index released in May.

Nearly two in three Singaporeans said they’d be willing to spend less on dining out and clothing to fund their travel too.

Conversely, travel resiliency may be less robust in places where pent-up demand has dissipated some, such as Europe and North America.

According to a March survey published in the Country Financial Security Index Report, nearly a quarter (23%) of Americans indicated plans to cancel or put off travel plans in response to inflation.

Still, Americans are expected to travel in large numbers this summer. More than half (55%) say they’re traveling for the Fourth of July holiday, according to a survey by the travel website The Vacationer — an 8% increase over last year’s survey, the company said.  

“More people are pivoting their plans to accommodate price hikes and additional costs, rather than canceling [travel] altogether,” said Eric Bamberger, senior vice president of hospitality at the marketing technology company Zeta Global. 

Demand for “pampering” travel, such as spas, is rising, while interest in “educational” travel to museums and national parks is down by more than 50%, according to a Zeta Global company representative.

Car rentals are declining, with rental rates dropping the fastest in the United States in places where gas prices are highest, such as California, Oregon and Washington, according to Zeta Global.

However, “hotels are on fire,” said Bamberger. “Some hotels in Las Vegas are at 95% occupancy rates, and this past Memorial Day was the best ever recorded day — revenue-wise — for many of the top hotel chains in the U.S.”

Rising costs are affecting travel expenditures this summer, with 74% of American consumers actively searching for ways to save on travel, according to Zeta Global. Nearly one in four say they are seeking out cheaper transportation, hotels or vacation destinations, according to the company.

But Expedia CEO Peter Kern told CNBC that other travelers are ready to spend more to travel.

“We all know there was lots of pent-up savings and underspend during Covid on services and travel,” he said. “So far it seems to be bearing out, that people are interested in spending — and if anything, spending more.”

When asked about reports that people are opting for cheaper vacations, he said: “We haven’t that so far … particularly in the middle and upper end of the market.”

Kern said if inflation starts to affect travelers, he agreed they will likely change, but not eliminate, their plans.

“If anything, perhaps travelers take a little bit off what their ambition is — of where they were going or what they were staying in — but they’re still going to travel,” he said.

Marriott CEO Anthony Capuano said the company, which operates in nearly 140 countries according to its website, is now seeing strong demand not just from leisure travelers, but also from group and business travelers.

“We think the summer is going to be gangbusters,” he told CNBC’s “Squawk on the Street” in May. “We feel great about this summer.”

After two consecutive months of negative demand, business travel interest in the United States increased by 365% in May, according to Zeta Global, which tracks website usage as well as location and transactional data from credit card and loyalty program purchases.

International travel interest from Americans also rose in May, it said, with interest in going to Asia, Europe and South America up more than 200% from the month prior, according to the company.   

That was before the Biden Administration dropped pre-departure Covid test requirements to enter the United States, a move which is expected to kickstart travel into and out of the U.S.

“Removing the testing requirement eliminates a source of stress for travelers which may have been holding them back,” said Expedia Group’s Head of Global PR Melanie Fish. “We expect demand will only grow from here.“