U.S. summer travel surges as pent-up demand is unleashed

Vaccines and safety – key hurdles in return to travel

There are signs that major concerns among consumers continue to subside. As of July, our Prosper Analytics survey data indicated that while respondents were concerned about the economy getting worse, their concern was only slightly higher than the pre-pandemic levels (Figure 1).³ Consumer confidence, as of July, also reached its highest level since the onset of the pandemic last year, as consumers’ optimism about both current and future economic growth conditions improved markedly.⁴

Concern remains about contracting COVID-19 while traveling, but some of the pandemic related factors weighing on consumer psychology are beginning to wane. In the July Prosper Analytics survey, among those who indicated they do not have plans to travel, 58 percent cited catching COVID-19 as the primary factor. While still sizable, the share is down sharply from 71 percent in our April survey.⁵

With consumers’ concerns about traveling slowly subsiding, their intent to travel continues to accelerate. As of July, 50.2 percent of consumers indicated they felt comfortable traveling, up from 43 percent in our April survey.⁶ Not only are consumers willing to travel, but they are following through on their desire to travel with greater spending.

Given that some parts of the U.S. were hit harder than others by the pandemic-induced recession, consumers’ desire to travel varied across the U.S. as well. Using data from the Census weekly Pulse Survey, we identified the areas of the U.S. with the greatest share of respondents planning an overnight trip of more than 100 miles, including Montana, North and South Dakota, and Minnesota. Conversely, Hawaii, New Hampshire, Arkansas, Oklahoma and Maine had among the lowest share of respondents planning a trip (Figure 2).⁷

The recovery in air travel has been impressive given the depths of the contraction last year. After falling 95 percent below 2019 levels, the rate of passengers traveling through security checkpoints through July was down just 21 percent from the same period in 2019, according to data from the Transportation Security Administration (Figure 4). Beyond the robust air travel trends, car travel has also accelerated. Vehicle miles traveled through May are now off by just 4 percent from their 2019 levels, according to the U.S. Department of Transportation (Figure 5).⁸

Supply and labor trying to keep up

This year’s surge in demand for travel is also bumping up against supply and labor constraints. It has been tough to keep rental cars in stock and to hire enough workers in the hotel and airline sectors to service the demand.

While the recovery in real demand is lagging some other categories of travel spending, the shortage of rental cars is leading to much higher prices, which explains the large gap between nominal and real consumer spending on rental cars. In Hawaii, some tourists are renting U-Hauls to avoid the high price of rental cars.¹²

The ratio of job openings in the leisure and hospitality sector relative to the unemployed workers in that sector is evidence of the tight labor market (Figure 8). Anytime the ratio edges above one, it implies there are more job openings than unemployed workers to fill the positions. All these short-term supply constraints when combined with the surge in travel, are translating into higher prices for consumers. As of July, rental prices were up a staggering 74 percent YoY, while airfare and prices were up 19 and 24 percent, respectively (Figure 9).¹³ While the price surges should be temporary, a persistence of the labor shortage could result in some travelers deciding to wait a bit longer to hit the road.