How Three—or Four—Factors Have Combined to Increase Travel's Affordability

Below, we take a deep dive into the data and what it means for travel. 

By the numbers:

• Wages: Average private sector wages were up 4.4% in June year-over-year (YOY). This exceeds the rate of inflation (3.0% YOY), meaning that purchasing power has increased.
• Overall inflation: Overall inflation moderated in June. While prices were still up 3.0% YOY, this is the lowest YOY increase since March 2021.
• Travel inflation: While overall prices moderated, travel prices declined. Travel—as reflected by U.S. Travel Association’s Travel Price Index (TPI)—was 1.1% cheaper in June compared to May, and 1.7% cheaper YOY.

What this means: With an increase in real wages and moderating inflation, U.S. consumers have an increased ability to spend. With the recent decline in travel prices, their spending on travel can stretch even further.

Dive deeper:

• Among TPI components, motor fuel and airfare experienced strong YOY price declines:
  • Motor fuel increased by 0.9% in June versus May but was down 27% YOY. [1]
  • Airfare declined by 8.1% in June vs May and was down by a staggering 19% YOY. [2]
• Other components were still up compared to last year:
  • Lodging prices were down 2.3% in June vs May, but still up 5% YOY.
  • Recreation and food/beverage-away-from-home prices were up 5.8% and 7.6% YOY, respectively.

What’s more:

• While all travelers are benefiting from lower travel prices, international travelers to the U.S. are experiencing an additional reprieve: a weaker U.S. dollar.
  • The U.S. dollar reached a 15-month low relative to major currencies in mid-July.

Increased confidence: In addition to—and partly as a result of—moderating prices, overall consumer confidence rose significantly in both June and July.

• The Conference Board reported that its consumer confidence index reached 117 in July—beating economists’ expectations—, and reached its highest level since July 2021.

The bottom line: After a strong recovery period leading to a solid summer, travel was expected to moderate in the fall. The latest wage, inflation, foreign exchange and consumer confidence data may provide a welcome boost for travel as consumers benefit from an expansion in their purchasing power and some great value in their travel spending. 

[1] The general YOY increase in gas and oil prices reflect a slowing global economy. In recent days, however, gas prices have increased again, reaching 3-month highs, largely due to the heat waves being experienced around the world.

[2] The decline in airfare is a result of a number of factors including lower gas prices (compared to 2022) and a general normalization in travel demand, following many months of post-pandemic pent-up demand. An analysis by Bloomberg shows that U.S. consumers' direct purchases from domestic airlines declined during the second quarter, the first drop in more than two years.