I heard a podcast last week about how Galloping inflation in Argentina Inflation has pushed everyone to party. Why? When inflation is really high, there is no reason to save money for later, because it will only lose value. So Argentinians spend their paychecks as soon as they come in, fill bars and restaurants, and generally live hand to mouth. It’s macroeconomic YOLO.
Inflation in the United States is not as severe – or as chronic – as that in Argentina. The prices of many travel expenses have actually started to fall. Airline ticket prices fell 9% from the previous month, according to September consumer price index data. However, it will take some time before prices for all products, including airfare, hotels and rental cars, return to some semblance of stability.
According to a recent Tripadvisor survey, two-thirds of Americans cited “cost” as the most important factor influencing their fall travel plans. Yet despite inflation, half of respondents plan to travel more this season than they did the same time last year. So travelers aren’t delaying or canceling their plans, but are instead trying to stick to them.
What should we budget-conscious travelers do? Throw our hands up in the air and party like the Argentinians?
Find out how travel prices have changed
It’s easy to talk about “tourism inflation” as if it were a monolithic force, but it’s simply the law of supply and demand playing out as usual. And it hasn’t affected all aspects of tourism equally.
At first glance, you might think that the dark blue line in the chart above represents the excitement over airfares this summer. But that line represents the cost of renting a car, which has gotten a bit cheaper in recent months but is still 46% higher than pre-pandemic rates.
Hotels and airline tickets, while more expensive than they were during most of the pandemic, are nearly back to baseline. And prices for “food consumed away from home” (e.g., those in restaurants) have steadily and stealthily climbed as much as 17% above pre-pandemic prices, according to September CPI data.
What does this mean for your travel budget? Your hunch about the cost of renting a car in Hawaii (or ordering a steaming plate of loco moco) is probably wrong. And your worst-case predictions about airfare and hotel prices are probably overblown.
This also means it will be easier to trim budgets by cutting back on packages that rely on car rentals or restaurant meals. Book a hotel room with kitchen This might not be cost-effective under normal circumstances, but it could be this year. And visiting a destination with good public transport, such as a European city, will avoid these problems. Exorbitant car rental prices.
Benefit from flexible pricing
Trying to figure out whether it’s a good time to book a trip to avoid future price increases is like trying to figure out whether it’s a good time to buy a stock. The truth is, no one knows. Yet travel bookings differ from investments in one crucial way: They can often be canceled or postponed if prices drop.
Flexible travel bookings can help you travel for less. For example, let’s say you’re planning a trip this fall and you’re wondering whether you should book a hotel now or wait to see if prices drop. In reality, you can do both: book a flexible rate now, lock in the price, and then cancel and/or rebook if prices drop.
It’s a coin toss situation. If prices go up, you’ll have gotten a lower rate. If prices go down, you can change your booking and save. The same logic applies to car rentals and air travel, as long as the bookings are flexible.
Be wary of “flexible” bookings that have restrictions or other limitations. And don’t book all your flights and hope to cancel later for a refund. Airfare refunds are often issued in the form of vouchers or travel credits, not cash.
Use those points and miles
(Specifically, cash prices increased while points and miles prices remained less affected, which had the mathematical effect of increasing the relative value of points and miles.)
The fact is, now is a great time to use points and miles, especially from programs that still use a rewards chart. Reward charts keep the price of points relatively stable and differ from programs that use dynamic pricing rewards tied to the cash value of a given redemption.
Hyatt hotels, for example, offer a value of 2.8 cents per point in our 2022 assessments, up from 1.9 cents per point in 2021. This increase in value is largely due to its rewards chart. Marriott, meanwhile, which eliminated its rewards chart earlier this year, is holding steady at 0.7 cents per point year over year.
Avoid stress
Will travel prices continue to drop? Will car rentals ever become affordable again? Honestly, we don’t know. And unless you’re the type of person who budgets for your travels down to the last penny, you don’t need to try to maximize every travel expense.
Inflation may be on an upward trajectory, and while travel prices are up across the board, that doesn’t mean you should blow your savings on a Maldives vacation. Your dollars aren’t about to lose as much value as toilet paper. We’re not at the Argentinian YOLO stage yet…
