Where Are Travel Prices Headed? Get Ready for Twists and Turns

If you think that airfare and hotel rate trends will be uniformly characterized by steep discounting as travel reopens unevenly across the globe, then guess again. Travel businesses have pent-up demand in their favor, to be sure, but how hotels and airlines price their services in coming months will play a crucial role in travel's recovery, especially as the global economy teeters toward recession and consumer spending pulls back. Take a look at the airlines. Yes, the airline trade group IATA reported that domestic airfares around the globe fell 23 percent year-over-year in May as airlines try to stimulate demand. But investment bank UBS found that while forward airfares in the next few weeks and months are weak in the United States, they were getting higher in Asia, and flat to heading upwards in Europe. So regional airfare disparities are very much in play. On the hotel front, STR data found that average daily rates in the United States fell nearly 40 percent for the week ending May 23, but the analytics firm forecasts rates to rebound nearly 2 percent in 2021. Referring to global airfare trends, Jay Shabat, senior analyst at Skift Airline Weekly, said there are so many variables at play, including capacity cuts, blocked middle seats, historically low fuel prices, travel restrictions, government subsidies, the extent of a business travel rebound, and the timing of a coronavirus vaccine, that there's no one-size-fits-all narrative about airfare fluctuations. "There's not a dominant trend out there right now with everything really expensive or everything really cheap," said Shabat, who conceded that one common theme is the global airline industry is getting smaller. Hotel rates in the United States are way down on average, and there is a discounting frenzy in destinations that are reopening such as Las Vegas, for example, where a luxury king suite at the 5-star Venetian was available Wednesday on its own website and on Expedia for $127. But Caren Kabot, founder and CEO of Solo Escapes, said rates for this summer at four- and five-star properties in places such as Cape Cod in Massachusetts and Newport, Rhode Island are similar to last year's because many properties are sticking to 30 percent maximum occupancy for social distancing purposes. Another factor, she said, is that Maine and Vermon