With thousands of flights canceled or delayed in the US over the July 4 holiday weekend, and the end of the school term in Britain later this month threatening to become the next flashpoint across Europe, there is now a danger that some people decide to sit out their summer getaway. While the next few months will still be strong for airlines and tour operators, the turmoil may take some shine off of the rebound.
EasyJet Plc, which on Monday announced the departure of Chief Operating Officer Peter Bellew, said two weeks ago that it would rein in its capacity after London Gatwick and Amsterdam Schiphol airports, its two biggest bases, capped flights to help cope with staffing shortages. It is not alone.
Across Europe, airports and airlines are pruning their schedules. British Airways will pull an estimated 800 more flights this summer, as it aims to reduced last-minute cancellations, Bloomberg News reported on Tuesday. Meanwhile, Scandinavian airline SAS AB said it had filed for Chapter 11 bankruptcy in the US, a day after its pilots union announced it would start striking with immediate effect.
TUI AG, the world’s biggest package-tour operator, is seeing demand above pre-pandemic levels. Thomas Cook, now reborn as a British online travel agent, is continuing to take bookings for later this summer. But there are signs that the snarl-ups are crimping some consumers’ enthusiasm to take a trip.
Although still well above 2019 levels, there was a slowdown in demand in June in the US and UK, for both international and domestic travel, according to an analysis of Google travel insight data by Sanford C. Bernstein & Co. Traffic to Booking.com and TripAdvisor Inc. also decelerated in June, Bernstein said.
The dip in UK demand for international travel in early June was particularly pronounced, and came after scenes of pandemonium at airports at the end of May, as many Brits headed for sunnier climes when a two-day public holiday coincided with the traditional mid-term school break and the Champions League football final in Paris. But Richard Clarke, analyst at Bernstein, says June also compares with a period of high booking activity in 2019.
Rising prices may also be taking their toll. There will be few bargains available in the so-called “lates” market this year, as there will be little excess hotel or flight capacity. While the regular summer trips on offer will have been negotiated well in advance, with prices for flights and accommodation locked in, if tour operators have to purchase extra rooms or seats on planes in the “spot” market, they will be paying more. So will their customers.
And the inflationary pressures don’t end there. Michael O’Leary, chief executive officer of Ryanair Holdings Plc, a pioneer of low-cost flights in Europe, warned that fares will rise for the next five years because flying has become “too cheap” to generate profits.
In the US, research from Destination Analysts, which has been tracking travel sentiment since the start of the pandemic, shows that some Americans are starting to reevaluate their plans amid spiraling costs.
In May, some 30.1% of the 4,000 US travelers polled said inflation had prompted them to cancel an upcoming trip, compared with 23.2% in April. When asked to rank the costs that were deterring travel, the top two were gasoline prices and airfares.
Part of the problem at airports, ferry ports and trains connecting Britain and France has come from surging demand. So, some softening at the margins may be no bad thing right now.
But that won’t be so welcome as airlines and tour operators head into the quieter autumn and winter seasons. The greatest uncertainty will come when people have depleted lockdown savings on this summer’s vacations and face rising food, fuel and home heating costs. End of year excursions might not be so festive — unless some of those people who put off traveling in July and August rebook for Christmas.
A holiday is a big expense, and it’s vulnerable to being culled from the budget. So far, the pent-up wanderlust of the past two years has insulated travel from the ravages of inflation. But that may be about to change.
Should Europeans and Americans continue to book a summer holiday in 2023, they may be reluctant to add a second getaway, say a trip over the new year celebrations or spring break. They may also trade down from the luxury hotel accommodations and business class flights that have characterized this year’s “revenge travel.”
So even if consumers keep calm and carry on vacationing over the next few months, it may turn out to be the last hurrah.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.
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