How to factor inflation into your travel budget
(NerdWallet) – Inflation is crushing nearly every aspect of Americans’ budget, including their vacations. Prices rose an average of 7.9% over the past 12 months ending in February 2022, according to the US Department of Labor. And one major travel expense has increased by far more than that: rental car prices have skyrocketed 24% year-over-year.
The consumer price index, which measures the prices of items such as travel, groceries, clothing and cars, in February 2022 recorded the highest inflation since 1982.
Annual inflation rates are a common way of understanding economic changes. But when comparing 2022 inflation data to 2021, it’s important to recognize how unique the past year was. In 2021, many people’s work schedules have been adjusted or reduced, and daily activities have come to a halt due to the continued closures of bars, restaurants and gyms. Travel, especially international travel, was difficult. But, given the low demand, trips were also generally quite cheap.
It’s almost certain that you’ll pay more for the same trip in 2022 than you did in 2021. But how much more should you expect to pay this year compared to years past when holidays were a little more normal?
Don’t let averages guide your travel budget
Several organizations have gone to great lengths to understand how much people spend on travel.
For example, according to Expedia’s 2022 Traveler Value Index, which surveyed 5,500 adults worldwide in November 2021, Americans plan to spend an average of $2,353 on their next trip. Separately, market research firm Destination Analysts’ November 2021 survey of more than 1,200 Americans determined that the average American leisure travel budget for 2022 is $3,797.
Even NerdWallet tries to assign a dollar amount to vacation spending. Americans intended to spend $1,814, on average, on travel during the 2021 holiday season, according to a September 2021 survey of 2,000 American adults conducted by The Harris Poll on behalf of NerdWallet.
But when it comes to vacation budgeting, using the average can be tricky, as your personal travel preferences often dictate your overall spending.
- Do you often fly first class to another continent or take short-haul flights on low-cost carriers?
- Do you usually stay in luxury accommodations, like overwater bungalows in the Maldives, or do most trips find you at your grandma’s house where you stay for free?
- Do you dine mostly at Michelin starred restaurants or are you the type to stock up on free hotel breakfasts?
Travel styles vary wildly, and you can’t always base your personal budget on a nebulous average from travelers with widely varying preferences.
Rather than comparing your spending to survey averages, it may make more sense to use your travel budget from past trips and adjust it for today’s inflation rates.
How Inflation Shapes Travel Costs
Especially if you’re building your next vacation budget around a 2021 trip, expect to pay a lot more now. But compared to pre-pandemic travel, some expenses could increase at roughly similar rates – and a major travel expense will likely cost less.
NerdWallet looked at the costs of common travel expenses over the past 10 years using CPI data from the Bureau of Labor Statistics. By analyzing February’s inflation numbers — and pairing those numbers with data from August of the same year to account for seasonality — we were able to see which elements of holiday budgets rose and which fell.
Here’s how those numbers rocked airfares, accommodations, rental cars, restaurants, and entertainment (like movies and concerts).
Air fares are still lower than pre-pandemic prices
A shining light for your travel budget: Airfares haven’t fully recovered.
The average cost of airline tickets in February 2022 – $222 – is still lower than the 10-year average of $269.72 in February and $263.20 in August. While the February 2022 price is above the February 2021 average of $197, it is still well below the February 2020 average of $265, which was the last month before the COVID-19 related lockdowns in the United States. United.
Even before 2020, airfares tended to drop. The 10-year high was back in 2013, the only year the average cost of airfare topped $300 in February and August.
That’s good news given that airfare and accommodation tend to be the biggest chunks of any vacation budget (and there aren’t quite as many hopes for budget accommodation this year).
Accommodation prices are volatile
Hotel prices are consistently higher in August than in February, likely due to seasonal travel demand.
The price of out-of-home accommodation, including hotels and motels, has seen one of the largest fluctuations of any price category throughout the duration of the pandemic.
In December 2020, average hotel prices fell as low as $263.25, hitting a 10-year low of $261.72, which dates back to December 2012. Still, it didn’t take long for prices are reaching historic highs. In July 2021, accommodation rates reached all-time highs, averaging $387.23.
Fast forward to now, and hotel prices have recovered slightly from historic highs. Even so, February 2022 still saw an all-time high for the month of February alone. Given the importance of seasonality in hotel prices, we can expect that August 2022 could also hit a new high.
Meanwhile, many hotels are cutting amenities, including daily housekeeping and room service. Hospitality companies blame factors such as high demand, staff shortages and supply chain issues.
Car rentals have one of the biggest price increases
The cost of renting a car jumped nearly 35% last year.
Rental cars have seen one of the biggest price increases, and summer 2021 renters have been particularly hard hit. Prices hit an all-time high in July 2021 at $236.80, and although they have recovered slightly, they are still well above the average prices of the previous 10 years.
For the most recent data from February 2022, prices are up 24% since the same month in 2021, and they are up 38.6% since February 2020. At this rate, be prepared for price increases lined up on demand for summer travel. You may want to retire from car rental altogether this year.
Restaurant spending is constantly increasing
The charts don’t show anything too unusual when it comes to setting your travel food budget in 2022.
Food prices are rising steadily every year, including in the era of COVID-19. In February 2022, the cost of out-of-home food is up almost 7% compared to February 2021 and almost 11% compared to February 2020.
To that end, foodies on a budget may consider turning to street vendors or casual quick stops for less expensive meals than sit-down restaurants for their 2022 vacation. Those with access to a kitchen (e.g. , in a vacation home rental or hotel suite) might consider stopping at local markets or grocery stores not only for the adventure, but also for the chance to buy ingredients to cook at home. home.
Entertainment spending also sees prices rise
There were slightly above-average jumps in travel-related leisure spending.
Like restaurants, entertainment prices have been seeing fairly consistent increases, with the exception of a slight dip in 2020. Luckily for consumers, price increases here haven’t been as drastic as those for restaurants.
In February 2022, the average price of cinema, theater and concert tickets is up almost 5% compared to February 2021 and around 6% compared to February 2020.
Travelers can opt for less expensive rather than paid activities for their 2022 vacation, such as hiking, visiting free days at museums, aquariums or zoos, playing board games at a brewery or taking walks at farmers’ markets.
2022 travel costs compared to pre-pandemic travel costs
Overall, prices are definitely going up, with rental cars being one of the expenses most likely to give you a new shock.
Here’s how average prices have changed since the pre-pandemic period:
|Current travel expenses||Percentage change, February 2022 over February 2021||Percentage change, February 2022 over February 2020|
|Plane ticket||12.7% more expensive.||16.9% cheaper.|
|Accommodation||29% more expensive.||6.9% more expensive.|
|Car rental||24.3% more expensive.||38.6% more expensive.|
|Food Away From Home||6.8% more expensive.||10.7% more expensive.|
|Films, theaters and concerts||4.6% more expensive.||5.7% more expensive.|
On the bright side, one major expense – airfare – continues to get cheaper. February 2022 airfares are down 16% from February 2020. Additionally, today’s prices are about 30% below their 10-year high, which was in May 2013 when they were high. on average at $326.50.
To account for inflation in your 2022 vacation budget and get a better idea of how much you should expect to spend, you can multiply your travel expenses from previous years by this year’s percentage changes. So if you spent $100 on a rental car in February 2020, you could multiply that figure by 38.6% and expect to spend around $140 on the same type of rental this year. If you spent $100 on concert tickets in February 2020, multiply that by 5.7% and expect to pay around $106 for the same show this year.
And if you don’t have exact figures for your past travel spending, know that expenses like hotels, entertainment, and food will likely take up a bigger chunk of your travel budget than before the pandemic. Rental cars will likely cost a lot more, and opting out of that expense altogether might be a smart money move. And there is a good chance that plane tickets will cost less.
Planning ahead can minimize the effects of inflation on your vacation budget
With airfares still low and rental car prices skyrocketing, maybe you’re skipping the road trip this year. Fly to a transit-friendly city like San Francisco, New York, or Boston. If you prefer a small-town vibe, take the ferry to a virtually car-free island like Catalina Island, California, or Mackinac Island, Michigan.
Even though airfare is more expensive on average today than it was at the start of the pandemic, you can take comfort in the fact that you are more than likely saving on airfare this year than before the pandemic.