The cost of airfare and car rentals has decreased, according to the U.S. Consumer Price Index for June.
Travelers seeking deals on domestic airline tickets will find that prices have dropped 8% from May and a significant 18.9% from the previous year.
Why the drop in airfares? Economists cite several reasons:
- Demand for travel after the easing of COVID-based restrictions is flattening out;
- U.S. domestic airline capacity has returned to pre-COVID levels;
- International destinations are becoming more popular;
- Travelers are planning more trips for specific holidays rather than spreading out their travel; and
- Jet fuel costs are less.
Car rental costs have also fallen, now sitting at an average of 12.4% less than a year ago.
“For car rental prices, which had gone to unseen levels, they are now settling into some type of normal,” KPMG Chief Economist Diane Swonk said in a Travel & Leisure interview. “We’re seeing the easing of demand in the used car market, which helps increase the inventory for car rental companies to buy a new fleet of cars.”
Hotel costs are up slightly, offsetting some of the savings from transportation. The CPI report found that all lodging prices away from home, such as hotels and motels, rose 5% since last year, though it fell slightly from the previous month.
Will consumers in the U.S. continue to see reduced costs for travel? Experts predict that travel demand will continue to be strong and that business travel — still weak from lifestyle and work changes due to COVID — may pick up in the months to come. This could keep prices lower overall in the travel industry.
“We’ve seen these patterns before and we hope the deceleration [of prices] continues,” said Ed Bastian, CEO of Delta Airlines, in an interview with CNBC.
The Consumer Price Index is a monthly report issued by the U.S. Bureau of Labor that explains the change over time for a variety of products commonly purchased by U.S. consumers.