By Doyinsola Oladipo
NEW YORK, May 28 (Reuters) - Rising airfares and hotel rates are making budget-conscious Americans delay or cancel summer trips while wealthy travelers are holding fast to vacation plans despite higher prices.
The trend underscores a growing divide in what had been a resilient post-pandemic travel rebound, another example of a so-called K-shaped economy that is showing up across consumer markets such as groceries, dining out and apparel.
Rising inflation, especially in fuel costs
pushed up by the U.S. war on Iran since late February, has been a driving factor.
Overall 45% of Americans in a recent Deloitte survey said they already made travel plans for this summer, the lowest in the last six years. The middle-income cohort of $100,000 to $199,000 had the biggest drop, to 37% from 45% the year before.
Speaking at a Bernstein conference on Wednesday, American Airlines CEO Robert Isom said there was "no doubt" demand had a K-shaped pattern, with higher-income travelers outpacing middle- and lower-income customers. Still, he said travel was growing across income groups and leisure demand was "incredibly" strong.
Among low- and middle-income consumers still traveling, many are waiting longer to book in hopes that fares will fall. Some flyers are forgoing international trips and choosing cheaper destinations closer to home. Budget-conscious consumers e are opting for driving or cruise packages, which include accommodations, food, activities and sometimes even flights in one flat price.
Airfare rose more than 20% in April from a year earlier, according to U.S. government data, and airlines are increasingly passing through higher fuel costs via fares and fees that disproportionately hit economy travelers.
Outbound international summer bookings are down a quarter year over year, according to data from InteleTravel, a host travel agency.
"There are people saying, 'Let me see how long I can wait to see if prices are going to drop,'" said Peter Vlitas, a vice president at Internova Travel Group.
That pullback is most visible at the back of the plane.
Premium cabin fares have risen far more modestly - about 7% compared with sharp increases in economy fares - making business and first-class price hikes relatively more bearable for affluent travelers, said InteleTravel CEO James Ferrara.
Recent college graduate and professional fencer Kamar Andreas, 24, told Reuters he had scrapped a trip to Spain from Atlanta this summer because airfare hovered around $2,000. He was expecting to spend about $1,000.
Andreas said there was some essential travel on the cards this year, like training in France, but even with those trips he was waiting in hopes prices will drop. "I've been trying to see if prices will fluctuate before I book because some of the prices are absurd," he told Reuters.
STRONG HEADLINE NUMBERS MASK GROWING DIVIDE
Millions of Americans are still expected to travel over peak summer periods, reflecting a willingness to absorb rising costs. Deloitte data shows travelers plan to spend more on their longest summer trips this year, even as fewer households participate.
But robust headline travel numbers are masking the growing divide, and travel agents and marketplaces said they can see the gap getting wider as people are forced to change the way they travel.
Independent travel agent Erika Bullock said roughly half of the travelers expected to join a group trip she planned to Bali and Thailand dropped out. "I know the flights had a lot to do with it, but then also planning going to Thailand and Bali, it's not a cheap trip," said the Fort Worth, Texas-based agent.
Economy hotel demand is softening, with some operators discounting to fill rooms, while higher-end hotels continue to see stronger growth.
"The young and underemployed are finding it increasingly difficult to gain a foothold," said Aran Ryan, director of industry studies at Tourism Economics, an Oxford Economics company. "But we’re still seeing an outlook for positive travel growth this summer."
(Reporting by Doyinsola Oladipo in New York; additional reporting by Aishwarya Jain in Bengaluru; Editing by Sayantani Ghosh and Cynthia Osterman)
