May 26, 2013 in Business

Holiday travelers stay close to home

Scott Mayerowitz Associated Press
 
Associated Press photo

Holiday travelers gather at the ticket counter at Portland International Airport in May 2012. AAA estimates 2.3 million travelers will fly for the 2013 Memorial Day holiday.
(Full-size photo)

NEW YORK — The forecast for summer travel, 2013: Partly sunny.

Airlines, hotels and campgrounds are commanding higher rates and seeing more customers than a few summers ago, and luxury hotels are selling out. Local businessmen and state officials are optimistic.

But for a travel industry still stinging from the Great Recession, the best it can likely hope for is another summer of steady, but slow, recovery. The blockbuster crowds seen in 2007 have become a distant memory.

Americans’ plans for summer travel mirror the current state of the economy. Rising home prices and a soaring stock market are encouraging those at the top of the income ladder to take more lavish trips. But large segments of the population are staying close to home because wages are stagnant, rents are high and the end of the payroll tax holiday has shrunk their take-home pay.

That’s why AAA isn’t expecting a resounding start to summer this Memorial Day weekend. Citing the “up and down economy,” AAA expects 31.2 million Americans to hit the road this weekend, virtually the same number as last year. Throw in planes, trains and buses, and the number of travelers will drop about 1 percent, AAA says.

As vacationers set out this summer, here’s what they can expect:

• Gas prices about the same as last year. The national average price of gasoline was $3.66 a gallon Thursday, 2 cents higher than during last year’s Memorial Day weekend. Tom Kloza, chief oil analyst at GasBuddy.com, expects prices to drift lower after the holiday and fall close to last summer’s low of $3.33 per gallon before hurricane season starts to drag them up again.

• More expensive hotel rooms. The average hotel will cost $112.21, before taxes and any other add-on such as resort fees. That’s up 4.4 percent from last year’s $107.52, according to hotel research firm STR. Hotels are also expected to be slightly fuller, with occupancy rates climbing from 69.3 percent last summer to 70 percent this year.

• Packed planes, steady airfare. Airlines for America, the industry’s lobby group, expects 208.7 million people to fly, up 1 percent from last year. About 87 percent of airplane seats will be filled with paying passengers. Domestic fliers will pay $421 on average for a round trip ticket, down $6 from last summer. International fliers will pay $1,087, up $8, according to the Airlines Reporting Corp.

• Amtrak expects to meet or exceed the 8.3 million passengers it carried last summer. But the taxpayer-backed railroad wouldn’t disclose how fares compare with last summer’s average one-way ticket of $66.39.

Mike Klopp, a commercial insurance salesman in Irvine, Calif., is starting to feel better about the economy. He and his wife plan to take their three kids on a vacation up the coast to Monterey in August — a trip they skipped last year.

But Klopp says local trips are the limit because they’re cheaper. Like many others, he’s not yet willing to splurge on a dream vacation.

Other Americans likely agree. Although the unemployment rate has dropped to 7.5 percent, compared with a post-recession high of 10 percent, the Federal Reserve doesn’t see it falling below 7.3 percent this year. And economic growth still isn’t as strong as it has been after previous recessions. The economy grew at an annual pace of 2.5 percent from January to March. Economists expect the rate to slow to 2 percent from April through June, partly because of the federal budget cuts that started taking effect March 1.

Those with higher incomes never stopped traveling, but thanks to new highs in the stock market they now feel secure enough to take longer vacations.

Patrick Veling, the owner of a California real estate data analysis and consulting business, says he’s taking his “most expensive vacation ever” this year. Instead of the normal one-week vacation, he and his wife, Susan, are taking their two adult kids on a three-week vacation through northern Europe that will include a 12-day cruise. They’ll see Denmark, Norway, the Shetland Islands, Ireland and the Netherlands.

“My confidence in the economy and my business is now strong enough that my wife and I have pretty much insisted we make this trip,” says Veling.

Others are benefiting from rising home prices and low interest rates. Their homes are finally worth more than they owe on their mortgage, and they are finding it easier to refinance. That leaves them more money to spend.

“The improvement in confidence is all in the upper income brackets,” says Diane Swonk, chief economist at Mesirow Financial.

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