Why is travel becoming more expensive?

After a year in which travel and hospitality were effectively moribund, these industries are now experiencing a boom — and consumers are paying the price, literally.

Whether it be land, sea, or air, here are a few factors that are making travel more expensive:

High volume of travelers.

Summer travel is back and in full swing thanks to increased vaccination rates, decreased international travel restrictions, and relaxed mask guidelines.

Many are also pursuing “revenge travel,” and making up for a year stuck at home by visiting exotic locations and spending more than they usually would.

As a result, domestic U.S. fares are up 9% since April 1 while international fares are up 17%. And as to be expected, as demand continues to rise, so will airfare and hotel rates.

Soaring gas prices.

As of Memorial Day Weekend, the price of gas reached a 7-year high. In May, high costs were the result of a gas shortage after a key U.S. pipeline was shut down due to a ransomware cyber-attack.

But why haven’t prices decreased since then? These prolonged price increases are largely driven by a shortage of tank truck drivers to deliver the fuel, as well as panic buying at the pump.

Rental car and ride share shortages.

Last year, many rental car companies significantly reduced their fleets in an attempt to minimize losses during the pandemic. And it has now become difficult to acquire new vehicles due to semiconductor shortages. As a result of this slim supply, cars that were previously rented for $100 per day are now listed for many hundreds of dollars, particularly at airports and popular tourist destinations.

Those who were planning to rely on rideshare services to avoid car rentals are also facing challenges. There is a shortage of drivers for Uber and Lyft, creating higher prices and longer wait times nationwide.

High demand for vacation rentals.

Many travelers are turning to vacation rentals rather than hotels to increase privacy and maintain a semblance of social distancing. There is also increased traffic to destinations that are off the beaten path, rather than cities, which is driving up demand in places that may only have a few rentals available.

Increased restaurant costs.

As I detailed in a previous blog, many restaurants are increasing their prices in the aftermath of the pandemic due to rising supply costs and labor shortages, among other factors.

A troubled cruise industry.

The cruise industry, in particular, is struggling to rebound from the pandemic. While already facing a serious PR problem from early 2020, passengers continue to test positive for coronavirus.

There is a significant segment of travelers for whom cruises were their preferred — or only — method of vacation. Now, they may be looking for destinations and experiences on land, and adding to the congestion.

While many of these phenomena are hopefully only temporary as the U.S. economy gets back on its feet, I do think that prices will continue to rise throughout summer — if not longer — before leveling off. However, the long-term impacts of this high-traffic travel period are still unknown.

But one thing I do know is that travel is much needed to reset after a year in lockdown. And to that, I say bon voyage!

Danilo Diazgranados is an investor, collector, and lover of fine wines and a member of the prestigious Confrérie des Chevaliers du Tastevin, a fraternity of Burgundy wine enthusiasts.