Holiday Travel Costs Surge, but Demand Isn’t Slowing

SPEAKER_1 (0:00)

So to help us break down, really, what's driving some of these costs and where consumers can still find savings, we're now joined by Hayley Berg, Lead Economist at Hopper and HTS. So Hayley, really appreciate you joining us on this Friday. Holiday airfare, though, has risen, I mean, sharply this year. What is driving some of these record prices, and is there any chance that travelers can see some relief before, say, Thanksgiving or Christmas?

Hayley Berg (0:23)

Prices are incredibly high for those who are planning to fly for Thanksgiving or Christmas. Just to put it into context, prices for Thanksgiving are up 31% year over year, about $95 per round trip domestic ticket. Prices for Christmas, about 23% or about $85 per ticket. So these are substantial price increases that we're seeing.

The majority of this increase is coming from higher jet fuel prices. Fuel costs for airlines have almost doubled compared to this time last year, and jet fuel is typically between 10% and 30% of the operating cost of a flight. So it's simple, pass through. Airlines have to pass through these higher costs in the form of higher airfares for consumers. Until we see a drop in jet fuel prices, I'm expecting these prices to stay high.

SPEAKER_3 (1:11)

Hayley, and I imagine too, given the holiday periods are high demand and resilient, given the need to travel, that that's pretty sticky from a demand side. My question is, obviously, you're looking at just broad averages across domestic flight paths, but are there certain paths that are a little bit more sensitive to pricing, or is this sort of a one size fits all, where it's just like, hey, this flight's a little bit longer, it's gonna get more expensive because you need more fuel kind of a thing?

Hayley Berg (1:42)

We're seeing pretty blanket price increases across destinations. I will say that there are some regions of the world, like Asia, where capacity has been coming back so quickly in the last couple of years after major delays post-COVID, that that capacity increase has offset some of the jet fuel cost increases. So you might see maybe a 10 to 15 percent price increase instead of something like the 30 percent we're seeing domestically. But the impact is pretty broad. International routes are, as you might expect, a little bit heavier hit because they require more fuel.

And then domestically, there are a few pockets where it's not just jet fuel driving up prices. It's also the exit of Spirit Airlines. So some of the regions where Spirit was the dominant carrier, bringing prices down with some of those ultra low fares, those customers might be seeing even higher prices because there's a little less competition and fewer of those low cost carrier prices available.

SPEAKER_1 (2:41)

Okay, and so curious here for someone who say has not booked yet, what do you think is the biggest mistake that people make when what would end up that of course costing them additional money and maybe hundreds of dollars? And I can speak to this. I did just book a flight for Thanksgiving and it was egregiously expensive. So I know all too well the pain of booking these flights right now.

Hayley Berg (3:00)

There's really two things you can do wrong at this point. One is wait. You should book your holiday airfare and your holiday hotel stay ASAP. Prices are really only going to increase from here on out. And after Halloween, once November hits, prices are going to stepwise increase almost every day.

The other thing is flying home on the Sunday after either holiday. You are going to pay a premium of hundreds of dollars per domestic ticket to fly home on Sunday, November 29th or the Sunday after Christmas. After Thanksgiving, that Sunday is not only the most expensive individual day of the year to fly, it's also the busiest. So you are going to get caught in long lines, maybe some of those domino effect delays and cancellations. So book now and try not to fly home on the Sunday after either holiday. You will save a lot of money.

SPEAKER_3 (3:49)

Hayley, as you guys assess these things, I always find it's probably a little bit difficult around the holiday season, as we said, that unless you absolutely for some reason couldn't make it back, you're going to make efforts to do so. And unfortunately, if things are up 31% year over year, they're up 31% year over year. You do what you can to mitigate that.

Are you seeing any signs of demand being, I guess, impacted by travel fairs at other non-peak travel times?

Hayley Berg (4:22)

You're right that holiday travel is very sticky. Most Americans see it as essential. They're either going home to see friends and family, or they're going on a long-awaited annual vacation of some kind. We are seeing sticky demand. Actual bookings for both holidays are up on the Hopper app compared to this time last year, which signals to us consumers are seeing the higher prices, shifting their planning forward, booking a little bit sooner.