Ouch. The average price of a gallon of regular gas in the United Sates ticked up to $4.27 this morning. That’s up 12 cents just since yesterday, up 63 cents since last week and up 81 cents since last month, according to the fuel tracker GasBuddy.
Spiking gas prices driven by Russia’s war have replaced Covid-19 fears as the chief obstacle for traveling this spring and summer, according to the latest Longwoods International tracking study of American travelers—and by a significant margin.
Nearly six in 10 (59%) US travelers say rising gas prices will impact their travel plans during the next six months—compared to 44% who say that Covid-19 would curb travel plans. Regarding what would “greatly impact” upcoming travel plans, 29% of respondents said surging gas prices, while 21% cited Covid-19.
For the travel industry, these are in many ways the best of times and the worst of times, according to Amir Eylon, CEO of Longwoods, the travel and market research company that fields the ongoing study. “There is such a high pent-up demand to travel, with 92% of travelers telling us right now that they have got plans to go somewhere,” he says. On the other hand, “this is also a unique convergence of a global pandemic, a period of very high inflation, and now a crisis of war breaking out.”
Historically, a surge in gas prices doesn’t necessarily cause people not to travel, but it does change how and where they go, says Eylon.
In short, travelers start thinking in terms of trade-offs. Somebody from the Mid-Atlantic, for instance, who had planned to travel to Florida might head to the Maryland shore. A family from Ohio that was planning to go to Myrtle Beach may decide to head to the Great Lakes instead this summer.
“That’s the first and easiest way that people scale back,” says Eylon. “The number one beneficiary of higher gas prices from a tourism perspective are regional drive-market destinations.” How quickly travelers start trading vacations for staycations usually depends on household finances. “For lower income levels, we’re probably very close, if not there,” says Eylon. “For the luxury market, we’re not we’re probably not close to that yet.”
Other travelers will drive instead of fly, especially to bucket-trip destinations like Disney World. “Airlines will be the biggest loser on this,” says Eylon. “They’re in a real pickle, because they’re trying to keep up capacity for what was originally forecast to be a very robust summer travel season.”
High gas prices will cause travelers to cut back in other ways, too. “They will reallocate their spend,” says Eylon. “Maybe they choose a limited-service hotel property instead of a full-service property, because not only will they get a lower rate, but there’s breakfast included many times, right, so that’s one meal. And maybe they don’t eat out as much on that trip.”
Unfortunately for the travel industry, experts don’t see a quick cure for pain at the pump. “It’s a dire situation and won’t improve any time soon. The high prices are likely to stick around for not days or weeks, like they did in 2008, but months,” said Patrick De Haan, head of petroleum analysis at GasBuddy.
Unsurprisingly, travel stocks have taken a hit since Russia’s invasion of Ukraine. The NYSE Dow Jones US Hotels Index, which tracks six leading hospitality companies, is down over 7% in the past five days, while the NYSE Arca Airline Index, which tracks 18 airlines, is down 15% over the same period.