Why Travel Costs Are On The Rise

You may have noticed that airfares seem higher than ever. It isn’t just you. Travel costs have skyrocketed, and it is estimated that they will continue to rise, possibly going up another 10% in the next year. The reasons for this are numerous. For one, oil prices have been increasing, which makes fuel for airplanes much costlier. On top of that, the economy has been rebounding from the pandemic around the world, which increases demand for travel. As demand goes up, so do prices, which is why we’ve seen a roughly 3.7% increase in hotel prices, with an additional 2.6% increase expected soon, though if there is a trade war the trend could be reversed. In the meantime, though, price increases are the norm. The Global Business Travel Association (GBTA) recently made the claim that we can expect airfare prices to go up above 7% in certain countries including India, Norway, Germany, Chile, and New Zealand. 

This comes after years of very low travel prices, also partly due to the pandemic, which killed demand in many places. Prices had also gone down as the capacity for air travel had gone up a fair amount, according to Michael Valkevich, the VP of Carlson Wagonlit Travel (CWT). Now, a new equilibrium will be reached, though consumers may not be thrilled with where it is ending up. The International Air Transport Association says that passenger yields are expected to go up more than 3% this year, which is unusual given seven years of stagnation in terms of passengers. So far, many predictions appear correct, such as the ones made last year by the CWT and GBTA that said we’d see airfares go up 3.5%. On top of that, labor and fuel prices have been elevated lately, and those costs then get passed on to customers to keep the business sustainable.