Consumers more than willing to “take the plunge” on high travel costs: economist

Hopper economist Hayley Berg sits down with Yahoo Finance Live to discuss holiday travel demand, airfare, other costs, and travel deal advice on Tuesday.

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With the prime shopping season just around the corner, consumer spending remains strong. Now, this month alone, shoppers have spent about $64.5 billion online. This is according to Adobe. This is basically flat compared to last year, but a sign that tough economic conditions haven’t stopped people from shopping online. Right now, some of the best-selling items this month in toys and games include Hot Wheels, Paw Patrol, and Nintendo Switch. Adobe data shows that, despite strong spending levels, the way consumers spend is changing, and it could be a warning sign for the economy. With buy now, pay later options have increased 13% since last year.

Our airports get full service travel for the holidays before Thanksgiving. Nearly 2.3 million passengers passed through security on Tuesday, up from 1.97 million on the same day in 2019, before the pandemic. AAA also expects 55 million people to travel 50 miles or more from home to celebrate Thanksgiving, which is 98% of pre-pandemic volumes.

Join us now for more information on holiday travel, Hayley Berg, Chief Economist at Hooper. Good to see you, Hayley. What’s the biggest shift, what’s the biggest change in travel this holiday season from last year?

Hayley Berg: Well, we’re definitely seeing many more people traveling this year than last year. With a significant amount of airline capacity recovering, we expect to see a 6% increase in seats available for reservation over the course of this week, as they were available in 2019. Much more than last year.

And as we look at spending, particularly when it comes to air travel, what is — what do people prioritize, and how much are they willing to spend right now?

Hayley Berg: We ask consumers this exact question at Hopper, and about 2/3 say price is their top concern right now, whether it comes to vacation trips or considering travel next year. But they are willing to pay. You know, airline prices for Thanksgiving, for example, last-minute tickets down 30%, or more than $100 per ticket, for domestic flights, and yet we expect much more capacity than last year and very full flights. So it seems that consumers are willing to bite that point of higher cost of air travel because they’re still willing to get out there, visit family, go home for vacations, or take some trips.

It’s incredible, Hayley, it defies all logic. Every plane, every airport seems full. How do Christmas travel prices compare to what they were a year ago?

Hayley Berg: Christmas prices, much higher than what we saw last year and in 2019. They’re going to go up even more. So right now, we’re only seeing a few percentage points above prior years, but as with Thanksgiving, we’re going to see prices skyrocket as we get closer. Something emerging from the pandemic is a change in how people book travel. They book a lot more last minute. It’s possible that many travelers haven’t booked their Christmas flights, which means that when we see a huge surge in demand right before the holiday, prices will quickly go up.

And apparently, Hailey kicked things off with her Black Friday deals. Then came Cyber ​​Monday, and now there’s Travel Deal Tuesday. What is this? How does that work, and how good are the deals actually?

Hayley Berg: Travel Deal Tuesday is the best day of the post-Thanksgiving shopping period to book travel. Hooper has more than 10 years of historical data. Analyzing all that data a few years ago, we realized that we’re seeing the deepest discounts and widest range of discounts on travel on the Tuesday after Thanksgiving, and what we’ve seen in previous years, and this year as well, is a lot of OTAs like Hopper are going to sweeten the deal. Prices will drop on many airlines and hotels. We’re going to run additional promotions, offer things like $100 off flights to Rome or Bali or Santorini, which means it’s the best day ever between now and next year to start booking travel, take advantage of those really good prices, especially as consumers are more concerned, can I Bear that trip to Disney next year?

An interesting travel direction, Hayley, is related to remote work. Holiday travel seems to be popular. So instead of this sharp spike up and sharp spike down, its effect is much more subdued. How does this affect prices?

Hayley Berg: Usually, we see huge savings if you can travel on the less popular days before the holidays. For example, coming back the Monday after Thanksgiving, you can save about $300 sometimes on domestic airfare. This year, we’re still seeing peaks and dips in when people travel and how much they pay, but come Christmas, a holiday where there’s quite a bit of time off from work and school, and many people have the flexibility to work remotely, we’re seeing more demand spread . There are still peak days that are more expensive, but nearly as many travelers will fly in the first days of the week before Christmas Eve, such as the Thursday and Friday before the weekend starts.

And we know Frontier has this bundle deal where for $599 you can fly as much domestically as you want. However, do you expect some of these airlines to start coming up with these kind of package deals or companion deals to keep demand going? Because, obviously, people can’t keep spending at this pace forever.

Hayley Berg: We’re already seeing really strong demand going into 2023, so I hope we’ll continue to see creative bundling and unbundling from airlines. And you know, the low-cost airlines, like Frontier, that offer super low, non-bundled fares is part of the reason we had, or had, low fares before the pandemic. So I’m hoping to see more creative ways to make travel accessible, because what we know, we’re seeing in the data, and we’re hearing that from our customers, is it important that Americans travel next year, even if prices are high.

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