As inflation eases, US sees sharp holiday travel surge

Travel for the U.S. Independence Day holiday is expected to rise to record levels as inflation on airfare, gasoline and hotel prices eases.

The American Automobile Association (AAA) is expecting a record number of people on roads and in airports in the week between Saturday, June 29 and Sunday, July 7. The organization estimates that some 70.9 million people plan to travel, the most since the pandemic.

The forecast for a surge in travel comes amid broader concerns that consumers are spending less on non-essential items, a key factor in a slow-growing economy. Inflation has eased significantly from levels it reached in 2022, notably in the cost of travel and vacations.

“Now that summer vacation is in full swing and with the flexibility to work remotely, more Americans are taking extended trips around Independence Day.“said Paula Twidale, senior vice president of AAA Travel.

The forecast, along with encouraging figures from the cruise sector, bodes well for a sector that is often hurt when consumers stop spending on non-essential products or services.

A record number of people have passed through the nation’s airports this summer. The U.S. Transportation Security Administration recorded nearly 3 million people at American airports on June 23, an all-time high. The agency anticipates the number of travelers will surpass 3 million sometime during the July 4 holiday.

Consumers continue to face inflationary pressures on a wide range of goods, but travel costs such as airfare and hotel stays are down significantly from a year ago. Hotel room rates were 1.2 percent lower in May compared with a year ago, according to government inflation figures. Those costs have been trending lower since the start of the year.

Gasoline prices, which weigh heavily on consumers’ budgets, are generally down from a year ago. Regular gasoline prices now average $3.51 a gallon, down 2 cents from a year ago, according to AAA.

The companies that will benefit most from high travel demand this summer will likely be Delta Air Lines, American Airlines, Marriott and Hilton, according to Morgan Stanley. Still, “The rising tide of demand should lift all boats“,” the report says.

Cruise companies are also emerging as winners. Carnival recently raised its profit forecast for the year and said 2024 bookings were the highest ever, both in terms of price and occupancy. It said customer deposits hit an all-time high of $8.3 billion in the fiscal second quarter and it estimates capacity will expand by 4.8% in 2024. Competitor Royal Caribbean has also raised its forecast for the year.