This summer will bear witness to the clash of two great forces affecting the travel industry: the desire for post-lockdown “revenge travel” versus record inflation forcing households to budget more tightly. Luckily for the travel industry, the desire to take a summer vacation will win out, but inflation will affect what summer travel will look like.
Here are five truths and no lies about the 2022 summer travel season.
Truth #1: People are going to travel
After more than two years of travel restrictions, Americans have indicated that they’re comfortable vacationing again, inflation or not. According to Mintel research on consumers’ vacation plans and priorities, 8 out of 10 consumers plan to take a trip sometime in 2022. This may not come as a surprise, as the economy, pandemic and other stressors can make vacations an appealing escape. Understandably, relaxation is key: 65% of this year’s travelers cite relaxation as a motivation to travel, far and away, the most common reason. Given the added financial stress of inflation, the stakes are high for travel providers to provide seamless, relaxing experiences that are worth the increased cost of travel.
Truth #2: Travelers will spend
The question is, on what? In September 2021, Mintel asked travelers about their vacation spending outlook, and nearly half said they intended on spending more in 2022 than before the pandemic. This number will likely be higher simply because travel has become more expensive, and certain sectors may lose out because of it. In other words, people will be spending more on travel, but that money isn’t going toward extravagance; rather, it’s going toward simply getting out in the first place.
Travel companies acknowledge that travelers will cut costs, but each sector within travel believes that cost-cutting will come at the expense of other sectors, and not their own. Airlines believe travelers will skimp on lodging, hoteliers say guests will eat out less, and activity providers say people will drive to nearby attractions over flying to farther destinations. They’re all likely right. What will likely happen is that travelers will plan around their most inelastic travel cost and tighten their belts elsewhere. So if they have to fly, they’ll choose less expensive lodging. If they’re set on a certain resort, they may drive there instead of flying. This means that companies will have to be very clear in how their service improves a trip (like being the more relaxing option), lest less spending goes toward them.
Truth #3: Low fares are back in focus
The pandemic gave airline passengers an opportunity to take a holistic assessment of air travel, a departure from the pre-pandemic race to the bottom airlines who were running to give out the lowest airfare. In fact, according to Mintel research on the airlines industry, just half of air passengers listed fare price as a top-three factor in selecting a carrier. With inflation hitting air fares particularly hard, travelers intent on flying this summer will be turning to Ultra Low-Cost Carriers (ULCCs) and basic economy fares and turning in their loyalty points. Airlines can enjoy the popularity now, but be aware that once inflation settles down, things like schedule flexibility and in-flight comfort will return as considerations.
Truth #4: Road trips are going to look like they did during the pandemic
The pain at the pump means that while road trips will still happen, they will look like pandemic-era road trips in a lot of ways. For one, they’re likely to remain short – according to Mintel, nearly 6 out of 10 recent road trips were to destinations 500-1,000 miles away. Moreover, attractions looking to pique passing travelers interest will find it tough as38% of pandemic road trips only stopped at the final destination (save for gas and potty breaks); with inflation tightening budgets, leisure stops are once again unlikely this summer.
Also at work is the fact that RV sales skyrocketed during the pandemic, and most of those new owners likely still have their vehicles and want to avoid sunk costs. As such, the increase in road trips to outdoor recreational areas, campgrounds, and state and national parks that we saw in 2020-21 will likely remain this summer. If a travel provider did well by road trippers in the past two years, they’re likely to do well this summer.
Truth #5: Hotels should expect more short-term booking
Remember the part about travelers looking to save? With fuel being an inelastic cost for road trippers, lodging is one area where they’ll be looking to make up some savings. Savvy travelers will be waiting for hotels to cut rates to move unsold rooms, using apps like HotelTonight to find last-minute deals. This is actually a continuation of a pattern seen during the pandemic; according to our research on travel booking, the biggest shift in hotel booking windows between 2019 and 2022 was five percentage point increase in hotel reservations made with 48 hours of check-in (from 9% to 14% of bookings). This came despite the extra precautions that travelers were taking in selecting the safest lodging they could. With this trend continuing, it further underscores how agile hotel reservation and booking systems need to be to accommodate last-minute travelers.
What we think
Americans have been cooped up for too long and are too stressed to let something like record inflation stop them from vacationing. They will, however, get creative with their travel budgets, creating some winners and some losers among sectors. Generally, the reach for savings will likely last a little longer than inflation, and providers need to be ready to highlight their value in the future.
