Here’s the travel industry’s secret pandemic recovery plan. You’re not going to like it.
EXCLUSIVE: Travel companies are raising their prices to make up for revenue lost during the plague.
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You'll probably hate the travel industry's secret pandemic recovery plan.
Alain Desarran does. He's trying to use a United Airlines ticket credit for a flight from Washington, D.C., to Beijing. Usually, it costs around $1,000 to fly to China roundtrip in economy class.
"Today, I looked at the fares through mid-June," says Desarran, a retired federal worker from Odenton, Md. "United's posted economy-class fares are well north of $8,000 per person."
It's not just him.
The airfare site Hopper forecasts ticket prices will rise by up to 5 percent by the end of this March but could surge by as much as 8 percent if vaccines are deployed quickly.
Hotels in many markets are projected to chalk up double-digit rate growth this year, including Seattle (up 13.5 percent), Boston (up 13.4 percent) and Chicago (up 12.6 percent) from 2020, according to hotel consultancy STR.
Weekly car rental rates, which are idling around $90 a week, will rev up to near $120 by the end of the summer, according to RateGain.
The travel industry's strategy is clear: First, demand a generous taxpayer bailout. Then, raise prices.
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What's about to happen
Travel companies are always looking for ways to increase profit, just like any other business. And from the looks of it, they've been busy.
"I don't know who would pay these exorbitant fares except for powerfully compelling reasons," Desarran told me. "When are airlines going to lower their fares to bring travelers back to long-haul and other flights?"
I wouldn't hold my breath. As long as enough people pay $8,000 for a roundtrip ticket to Beijing in economy class, United will keep the fares at that level. And by the way, United and other airlines will be testing the limits of what we're willing to pay for domestic fares, too.
You can still find a bargain here and there. For example, STR projects none of the major hotel markets will recover to 2019 room-rate levels until 2024.
But don't wait too long. Miami's room rates are only down 4.1 percent from last year, and Virginia Beach will end 2021 off by only 7.7 percent. In those markets, it's reasonable to expect room rates to more than recover by next year, following the airline model of charge-as-much-as-you-can.
Other industries can already name their own price. Consider vacation rentals, which are widely considered a safer alternative to hotels. Summer reservation volume is 85 percent higher compared to the previous June, July and August, according to rental platform Guesty.
"Book now," says Amiad Soto, Guesty's CEO.
It's probably too late. This July, the average vacation rental reservation will cost 12 percent more than it did a year ago.
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This is the right way to recover
There's a right way and a wrong way to recover from a once-in-a-century pandemic. And the travel industry is showing us the wrong way.
The airline industry alone has received a generous $59 billion bailout, or the equivalent of $168 for every American.
The Biden administration's $1.9 trillion COVID-19 relief package, which is expected to pass next week, contains all kinds of goodies for the travel industry, not just airlines. It includes extending the Paycheck Protection Program application deadline until December 31 and allowing for a third draw on loans.
These provisions will be vital to ensuring travel companies can maintain operations and keep workers on payrolls, according to the U.S. Travel Association, the travel industry's trade association.
The point is, everyone is at the trough. It's not just airlines, but attractions, hotels, restaurants and resorts, too. It's the entire hospitality industry.
And the way you say "thank you" for the taxpayer support is not by immediately raising prices. You do it by keeping your cancellation terms flexible and your rates affordable.
Airlines, car rental companies and hotels want you to cover their pandemic losses and profits.
If you aren't careful, you will.
What you should do
Only you can stop the madness of $8,000 tickets.
Say "no" to higher prices. Consumers control fares. If they do what Desarran does and refuse to pay exorbitant rates, travel companies will have no choice but to lower their prices.
Complain. If your airline takes billions in aid and then offers you an outrageous fare, you bet you should complain. Here's how to contact your congressional representative. And if you're flying, you might also want to let the Department of Transportation know about your experience.
And no cheating! Travel companies tend to hide their price increases by making their refund terms more restrictive. Don't let them. If you see an airfare or hotel rate with absurd refund terms, walk away. If enough travelers do, the companies will have to change their policies.
💬 Have you seen any outrageous travel prices lately? Do you think travel companies should take government aid and then raise prices to cover their 2020 losses? The comments are open.
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All of my 2020 trips have been shifted into 2021, and I ave already been seeing cancellation for the next few months, so I now have tso domestic trips and an international crammed into just this fall. Because all of the Anointed Experts are still telling us that if we want to be safe we should not plan any travel before 2022, I went ahead and booked my air for all three trips this week. The prices were still good, even for business class to Eastern Europe.
Now that the number of first vaccinations in he US has passed 50 million with about 25 million second shots, I think that with the number of people who have already had the disease this will bring us to herd immunity before summer. As soon as everyone gets the idea that they can travel agin and do it this year, prices will go up. If you're going to travel this year, plan it now.
My husband and I both got vaccinated so decided to book a cruise for Nov 2021. I am finding that the prices for travel insurance is now in the 15-18% range of the cost and CFAR is adding between another 40-50%. I've looked at all the companies who underwrite your great program and Forbes 'best of list'. I think this is something you should update, as your recent article on travel insurance said cost should be between 4-8%. Believe me, this is real sticker shock.