Travel prices are rising — and here’s the reason

travel prices take off

Travel prices are rising.

The airfare site Hopper forecasts ticket prices  will jump by up to 5 percent by the end of this March but could soar by as much as 8 percent if vaccines are deployed quickly.

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Hotels in many markets are projected to chalk up double-digit rate growth this year, including Seattle (up 13.5 percent), Boston (up 13.4 percent) and Chicago (up 12.6 percent) from 2020, according to hotel consultancy STR.

Weekly car rental rates, which are idling around $90 a week, will rev up to near $120 by the end of the summer, according to RateGain.

What’s going on?

Don’t panic. It’s just part two of the travel industry’s pandemic recovery plan: First, demand a generous taxpayer bailout. Then, raise prices.

That was some bailout!

The airline industry alone has received a generous $59 billion bailout, or the equivalent of $168 for every American.

The Biden administration’s $1.9 trillion COVID-19 relief package, which is expected to be signed into law today, contains all kinds of goodies for the travel industry, not just airlines. It includes extending the Paycheck Protection Program application deadline until December 31 and allowing for a third draw on loans.

These provisions will be vital to ensuring travel companies can maintain operations and keep workers on payrolls, according to the U.S. Travel Association, the travel industry’s trade association.

Wouldn’t it be nice if travelers had a bailout like that?

Now travel prices are rising

Now comes phase two — higher prices. Alain Desarran has already seen that. He’s trying to use a United Airlines ticket credit for a flight from Washington, D.C., to Beijing. Usually, it costs around $1,000 to fly to China roundtrip in economy class.

“Today, I looked at the fares through mid-June,” says Desarran, a retired federal worker from Odenton, Md. “United’s posted economy-class fares are well north of $8,000 per person.”

He’s stunned by the sudden increase — and he refuses to pay them.

“I don’t know who would pay these exorbitant fares except for powerfully compelling reasons,” Desarran told me. “When are airlines going to lower their fares to bring travelers back to long-haul and other flights?”

I wouldn’t hold my breath. As long as enough people pay $8,000 for a roundtrip ticket to Beijing in economy class, United will keep the fares at that level. And by the way, United and other airlines will be testing the limits of what we’re willing to pay for domestic fares, too.

There are still bargains, but …

You can still find a bargain here and there. For example, STR projects none of the major hotel markets will recover to 2019 room-rate levels until 2024.

But don’t wait too long. Travel prices are rising. Miami’s room rates are only down 4.1 percent from last year, and Virginia Beach will end 2021 off by only 7.7 percent. In those markets, it’s reasonable to expect room rates to more than recover by next year, following the airline model of charge-as-much-as-you-can.

Other industries can already name their own price. Consider vacation rentals, which are widely considered a safer alternative to hotels. Summer reservation volume is 85 percent higher compared to the previous June, July and August, according to rental platform Guesty.

“Book now,” says Amiad Soto, Guesty’s CEO.

It’s probably too late. This July, the average vacation rental reservation will cost 12 percent more than it did a year ago.

This is not right

There’s a right way and a wrong way to recover from a once-in-a-century pandemic. And the travel industry is showing us the wrong way.

The way you say “thank you” for the taxpayer support is not by immediately raising prices. You do it by keeping your cancellation terms flexible and your rates affordable.

Consumers can fight back. If they do what Desarran does and refuse to pay exorbitant rates, travel companies will have no choice but to lower their prices. They can also complain to Congress and to the Department of Transportation when airfares soar following a magnanimous taxpayer bailout.

Or you can get help from my consumer advocacy nonprofit. We can’t negotiate a lower fare for you, but we’ll do our best to assist you if you’ve been overcharged for something.

Airlines, car rental companies and hotels want you to cover their pandemic losses and profits. If you aren’t careful, you will.

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