Why is travel so expensive right now?!

Why is travel so expensive now? You probably won’t like this answer

Mary Barbuto wants to know why travel is so expensive right now — specifically, for rental cars. A one-week rental of an SUV at Fort Lauderdale International Airport next month will cost $134 per day, or $1,171 total.

“I can’t believe how outrageous the prices are for rental cars,” she told me. “Either they are very expensive, or the locations don’t have cars.”

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It’s not just cars. Almost all travel, from airfares to vacation rentals, is getting more expensive. There are various reasons for the price increases, but there’s one that applies across the board. And you’re probably not going to like it.

How expensive is travel now?

No one systematically tracks car rental rates. But I’ve seen prices as high as $200 per day — roughly quadruple the standard rate — during this spring’s car rental shortage.

Airfares are rising, too. Although prices remain below 2019 levels in many markets, experts tell me they’ll pick up and could even exceed the last full prepandemic year. A new report from Hopper predicts round-trip domestic airfares will climb 4 percent this month already rising 12 percent since April. That’s a 16 increase heading into the summer.

And vacation rentals are having a banner year, with roughly twice the summer bookings than 2019, the last normal year. Prices are higher and will continue to climb as demand soars.

MMGY Global CEO Clayton Reid described the summer prices as travel inflation.

“It’s real,” he says. “Deals are hard to come by for summer. Demand is so high that prices are actually going up in many places, even airfares are on the rise because demand is outweighing airlines’ reduced schedules.”

Bottom line: Travel feels pretty expensive right now.

But why are prices so inflated?

Here’s the standard answer to the question: Why is travel so expensive? Travel companies use sophisticated yield-management programs to price their rooms and seats. As demand rises, the programs help them optimize rates to extract the most money from customers.

The only limit is the little card on the back of your hotel room door that lists an outrageous “Maximum Possible Rate.” That’s to prevent price gouging, by the way. Don’t laugh.

But almost no one has discussed the obvious reason for these recent price increases. Sure, each industry has its own justification for higher rates.

For example, the car rental industry sold off half its fleet during the pandemic because it believed it was the end of the world. Now it can’t buy cars fast enough because of the chip shortage. Vacation rentals were a “safe” bet for accommodations during the pandemic, with the Centers for Disease Control even endorsing them. Up prices go.

And why is travel expensive across the board?

The answer is simple: The travel industry is trying to make up for a lost year.

Now that demand has returned, they’re raising prices quickly to recover some of the missing revenue. The yield-management systems rely on human guidance. And the humans are telling the systems to charge as much as possible, as soon as possible.

Now they’re coming after me

Raising prices is one thing, but travel companies are going above and beyond. They’re also adding new junk fees in hopes of accelerating their recovery. I know because I’ve seen them.

Some are small. When I tried to do an online takeout order from a restaurant in Richmond, Va., this weekend, it added a $9 “service fee.” I asked about this surcharge and a representative apologized, saying its payment system added the fee automatically.

That was a half-truth. The payment system charged the restaurant a flat rate but gave it an option of adding the service fee. It was $9 in found money. Add up all the online orders and they’ll more than cover the $149 monthly charge for the restaurant’s payment system.

Others are not small.

Remember my vacation rental stay in Sedona during the lockdown? Even though I thoroughly cleaned the home, the property manager ordered a deep clean, anyway. The bill — and I’m not making this up — was $1,350 plus a $1,000 “administrative fee.”

Crazy.

If you spend enough time on the road this summer, you’ll run into these nuisance fees. Travel companies aren’t just raising their prices, they’re upping their fees and surcharges, too.

What can you do?

So now we know why flights are so expensive, why car rentals are so expensive — indeed, why everything is so expensive this summer.

My advice to Barbuto: Avoid renting a car at the Fort Lauderdale airport or postpone your visit. You can still use a courtesy van to get to your hotel or ridesharing to reach your restaurant. Worst case scenario, you can delay your visit until car rental rates become reasonable again.

I like to call this the Nancy Reagan solution: Just say no.

I, for one, refuse to pay a $1,000 administrative fee for work that I didn’t order or approve. If you see a $9 service fee on your next online order, try another restaurant. If your car rental company tries to charge you $200 per day for your next vehicle, same thing.

Doing that sends a clear message to the revenue managers: You priced your products too high. You need to lower your rates. You have to remove the junk fees now.

The travel industry isn’t going to like my solution. But they should have thought of that before they ordered their revenue managers to start pricing their products as if there were no tomorrow. Sure, there’s pent-up demand for travel. But we’re not insane.

And what if travel stays expensive?

I had a sobering conversation with a fellow consumer advocate yesterday. He’s been fighting fees for most of his career.

“I’m about to give up,” he confessed. “I don’t think we’ll ever win.”

I’m still processing what he said. I hope he was just having a bad day because I think the war on high prices and junk fees is winnable. You just have to define victory carefully.

  1. Buy elsewhere.
    The Nancy Reagan solution works. Certainly, turning down the high prices and junk fees before your purchase is effective, at least for you. It also sends a message to the travel company. But it’s not enough.
  2. Buy safe.
    Don’t let hotels and car rental companies hit you with additional charges after you’ve checked out. I finally discovered a credit card worth recommending. It’s called Privacy.com, and it allows you to generate a unique credit card number for each purchase. When you check out, you turn off the card. I used Privacy.com to prevent a late charge on a purchase recently. But that’s another story.
  3. Government regulation.
    But those two strategies alone won’t stop the price-gouging and junk fees. Thoughtful government regulation can keep some of the worst practices in check. We’ve already seen some positive results both in travel and in the financial sector. But more needs to be done. Contact your representative and demand action. There’s never been a better time.

As the summer travel season unfolds, more people will be asking the same question: Why is travel so expensive now? You might not be able to change the absurd prices, but you don’t have to be a victim, either.

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