Inflation Is Rampant In Travel Even When Prices Don’t Appear To Be Rising

For much of the pandemic it’s been almost non-sensical to talk about inflation. What’s been the price of a trip to Australia, compared to 2019? It isn’t infinite, Nicole Kidman’s quarantine-free visits show it’s possible at some price even if that price isn’t usually paid in cash. But it’s many orders of magnitude higher than it used to be, with borders largely shut even to Australian residents.

The price of tourism to Europe was similarly high for Americans, before this past summer. The cost has fallen, even if part of the price of visiting many destinations now includes not just air and lodging but also vaccination (whose nominal cost is paid by the U.S. government).

On the other hand, there’s been significant inflation in American Airlines first class since you get less at the same price point.

A pre-COVID example of shadow inflation: the infamous Lay’s potato chip incident of 2014. Lay’s intentionally included about five chips less per bag, lowering content from 10 ounces to 9.5, yet still charged $4.29 per bag, meaning customers were paying (and Frito-Lay was making) 5.3% more per ounce of chips.

…“Many types of businesses facing supply disruptions and labor shortages have dealt with those problems not by raising prices (or not only by raising prices), but by taking steps that could give their customers a lesser experience.”

According to Cole, “Over the last 18 months … goods and services are getting worse faster than the official statistics acknowledge,” implying that “our inflation problem has actually been bigger than the official statistics suggest.”

American Airlines used to offer a hot meal in first class, now there’s the ubiquitous shrink-wrapped turkey sandwich. There’s been no made-to-order guacamole on my recent Admirals Club visits, but the price of an Admirals Club membership hasn’t fallen. The airline will no longer refund tickets when its schedules change by an hour – it now requires a four hour change to be eligible for a refund.

Delta tickets are more expensive at the same price point not only because of less inflight service but also because you pay in time, rather than money, when you need to speak with the airline. And even if you know the workaround of ringing up Delta’s Singapore reservations line, you pay for an international call even if you’re using Skype or similar internet phone service.

So-called full service hotels used to include a bundle of services, like restaurants with long hours and wide menus and available room service. They used to offer daily housekeeping. In other words they used to differentiate themselves from limited-service properties (who also reduce housekeeping services) and from home sharing. You now get less than you used to even if you aren’t spending less. The product has changed and it’s lower quality.

For the week of October 10-16, 2021, hotel average daily rates were down 1.4% against 2019 yet costs are down much more than that.

Perhaps the one area where higher prices and scarce inventory have followed the traditional path in travel is rental cars where if you can rent a car it’s expensive and then you have to hope there’s a car there when you arrive. Hotels and airlines are just providing you less, while not charging you proportionately lower prices, and so inflation isn’t as obvious.

(HT: Anthony H.)

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Gary,
    Why don’t you mention this type of hidden inflation when you talk about the fall of the cost of air travel since deregulation? Planes are significantly more crowded (worse experience), with poorer service, fewer bundled services, packed overhead bins, and an inferior pre-flight experience (9/11 more than deregulation contributed to that). It’s great that the cost of air travel fell so much after deregulation but it is a bit disingenuous not to take into account some significant declines in quality.

  2. @Roy – air travel is 20%-25% of the cost pre deregulation (adjusted for inflation) on many routes. The purpose of air travel is to get you from pony A to point B not to serve a great meal or offer you extra space.

    If you want that fly private. Sorry but I am so damn sick of old people (and I’m old) taking about the “good old days”. My God – nothing is going back like it was before 2019 (let alone the 70s or 80s) so accept what is here now and adjust. Goes for too Gary! If you don’t like what you get then you have the option of not purchasing it – problem solved!!

  3. @ Gary — Just came back from 5 nights at Park Hyatt Dubai. It was great to be reminded of what real service is — people happily doing things for you without their hand stuck out, people who genuinely care if you are happy with the service delivered, and lots of “Yes, sir”s. So nice.

    Returned to US to spend one night at Hyatt Place LAX, and well, service was a pathetic joke. I know where I’ll be taking my business.

  4. I have found that rental car rates in the US this fall have dropped between reservation and check-in. I still can’t risk going back to Hertz but the other big guys have had good service and comparable or better than pre-covid rates and service.
    Also, this Thanksgiving appears to be going quite smoothly for US airlines. 3 more days to go but the weekend is off to a good start.

  5. Gary – You act if these changes in quantity and quality haven’t been happening all along. Package sizes and things like customer service wait times, first class meals, etc… have been declining for decades. This is why we have free markets and individual choice. If a service sucks, then generally a competitor will step in an provide that service as a differentiator. But that only works if the service is actually demanded by the public.

    Yep, inflation has finally caught up with spoiled Americans and other 1st world countries that have been using labor and material arbitrage to keep prices low for years. Yep, workers are going to be more expensive, basically because we have less of them now. Millions have retired early and millions have changed spending habits and/or decided to tell corporate America to get bent. If a person want’s better service, then they can open up their wallets and pay for it.

  6. I’ve given up on travel within the US. Prices are exhorbitant compared to what you get and service is too often disappointing. I now choose to spend my travel budget overseas where I feel I get better value for my money.

    Just one example: a new Four Seasons resort very recently opened up in Napa Valley located about an hour’s drive from my home. Standard room for a mid-week one night stay during low season (early December) is $1,200 plus taxes. Hard pass. I’d rather stay at a place like this in the south of France or Tuscany for about half the cost:

    https://www.villalacoste.com/
    https://www.belmond.com/hotels/europe/italy/tuscany/belmond-castello-di-casole/

    More discussion on shadow inflation:
    https://www.nytimes.com/2021/10/10/upshot/shadow-inflation-analysis.html

  7. Also if your trip is international now you have to spend significant time to figure out restrictions, where a lab is in a foreign country, set aside time for the COVID test, and of course money for the testing and financial issues if your test fails or otherwise some other reason results in denied boarding or flights changing. Lots of visas which used to be easily on arrival now have some extra process, only through fixers or guides to get approval which also costs extra. Plus hotel jail costs.

    In the last two years I must have spent about $1000-2000 extra just in covid related BS.

  8. Elections have consequences. Fuel is up by at least 1/3 just since last year. Taxes are going up. Airlines and hotels haven’t been profitable in two years. It all adds up.

  9. Companies have been doing the “give them less product, charge customers same price” for years!

  10. Guac is served in the AC from 4pm to 6pm. When 6pm hits, they disappear faster than Houdini. But it is not gone.

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