How to Account for Changing Prices in Your 2023 Travel Budget
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Inflation is crushing almost all aspects of Americans’ budgets — including their vacations. Prices rose on average 8.6% for the past 12 months ending in May 2022, according to the U.S. Department of Labor. And one major travel expense rose way more than that: Rental car prices skyrocketed 24% year over year based on February data.
The Consumer Price Index, which measures prices on items like travel, groceries, clothes and cars, in May 2022 saw the highest inflation reading since December 1981.
Annual inflation rates are a common way to understand economic changes. But when comparing 2022 inflation data to 2021, it’s important to acknowledge how unique the last few years have been. For instance, in 2021, many people’s work schedules were adjusted or reduced, and daily activities came to a standstill due to ongoing closures at bars, restaurants and gyms.
Travel — especially of the international kind — was difficult. But, given such low demand, travel was also generally pretty cheap.
It’s almost certain you’ll pay more for the same trip in 2023 than you did in 2021. But how much more should you expect to pay this year versus past years, when vacations were a bit more normal?
» Learn more: The NerdWallet travel inflation tracker (updated monthly)
Don't let the averages guide your travel budget
Several organizations put a tremendous amount of effort into understanding how much people spend on travel.
For instance, according to Expedia’s 2022 Traveler Value Index, which surveyed 5,500 adults worldwide in November 2021, Americans plan to spend, on average, $2,353 on their next trip. Separately, market research firm Destination Analysts’ November 2021 survey of more than 1,200 Americans determined that the average American’s leisure travel budget for 2022 is $3,797.
Even NerdWallet tries to peg a dollar figure to vacation spending. Americans intended to spend $1,417, on average, for travel during the 2022 holiday season, according to a September 2022 survey of 2,000 U.S. adults conducted by The Harris Poll on behalf of NerdWallet.
But when it comes to vacation budgeting, using the average can be tricky, as your personal travel preferences often dictate your overall spending.
Do you often fly first class to another continent or are you taking short-haul flights on budget carriers?
Do you typically stay in luxury accommodations, like overwater bungalows in the Maldives, or do most trips find you at your grandma’s where you’re staying for free?
Do you dine primarily at Michelin-star restaurants or are you the type to load up on free hotel breakfast?
Travel styles are highly variable, and you can’t always base your personal budget on a nebulous average sourced from travelers with wide-ranging preferences.
Rather than comparing your spending to averages from surveys, it can make more sense to use your travel budget from past trips and adjust according to today’s inflation rates.
How inflation is shaping travel costs
Especially if you’re building your next vacation budget based on an earlier trip, expect to pay far more now. But compared to pre-pandemic travel, some expenses might be increasing at roughly similar rates — and one major travel expense will likely cost less.
NerdWallet looked at the costs of common travel expenses over the past 10 years using CPI data from the Bureau of Labor Statistics. Here's how those numbers shook out for airfare, travel lodging, rental cars, dining out and entertainment (like movies and concerts).
Here's how those numbers shook out for airfare, travel lodging, rental cars, dining out and entertainment (like movies and concerts).
Airfares are at record highs
Airfares are at record highs, and the rate of increase since 2020 and 2021 is especially shocking given how low airfares dipped in the early part of the pandemic.
The average cost of airfares in May 2022 was 19% higher than the previous month and 38% higher than May 2021. What’s more, the May 2022 price is over 22% higher than the average from March 2019, which would have been the last comparable May before COVID-19-related lockdowns in the U.S.
Lodging prices are volatile
The price for lodging away from home, including hotels and motels, saw one of the biggest swings of any price category throughout the duration of the pandemic.
In December 2020, average hotel prices dropped to their lowest levels since December 2013. Yet it didn’t take long for prices to hit all-time highs. Just seven months later in July 2021, prices had increased 47% to their highest level in the Consumer Price Index.
Fast forward to now, and hotel prices continue to set all-time highs. Given how much seasonality plays into hotel prices, we can expect that the summer months could follow suit.
Meanwhile, many hotels are cutting back on amenities including daily housekeeping and room service. Hospitality companies blame factors including high demand, staffing shortages and supply chain issues.
Car rentals have one of the biggest price increases
Rental cars have had one of the biggest price increases, and renters in summer 2021 got especially pummeled. Prices hit an all-time high in July 2021, and while they’ve slightly recovered, as of May 2022 they’re still around 70% more expensive than they were in May 2019.
At this rate, be prepared for price increases aligned with summer travel demand. You might want to opt out of the rental car altogether this year.
Restaurant spending consistently rises
Food prices consistently rise every year, including in the COVID-19 era. In May 2022, the cost of food away from home is up nearly 7% versus May 2021 and about 15% versus May 2019.
To that end, foodies on a budget may consider turning to street vendors or fast-casual stops for cheaper meals than sit-down restaurants for their 2022 vacation. Those who have access to a kitchen (say, in a vacation home rental or a hotel suite) might consider stopping by local markets or grocery stores for not just the adventure, but also for the chance to buy ingredients to put together at home.
Entertainment expenditures see price increases, too
There have been some slightly larger-than-average jumps for travel-related leisure expenses.
Like restaurants, entertainment prices see fairly consistent increases — save for a small dip in 2020. Luckily for consumers, price increases here haven’t been as drastic as those for dining out.
In May 2022, the average price for movie, theater and concert tickets is up about 6% compared to May 2021 and about 10% compared to May 2019.
Travelers may opt for lower-cost activities rather than paid ones for their 2022 vacation, such as going hiking, checking out free days at museums, aquariums or zoos, playing board games at a brewery or wandering farmers markets.
2023 travel costs vs. pre-pandemic travel costs
On the whole, prices are certainly rising, with rental cars as one of the expenses most likely to give you some newfound sticker shock.
Here’s how average prices have changed since pre-pandemic times:
To account for inflation in your 2023 vacation budget and get a better idea of how much you should expect to spend, you could multiply your trip expenses from past years with this year’s percent changes.
So if you spent $100 on a rental car in May 2019, you could multiply that by 70% and expect to spend about $170 on the same type of rental this year. If you spent $100 on concert tickets in May 2019, multiply that by 10%, and expect to pay about $110 for the same show this year.
And if you don’t have exact numbers from your past trip expenses, realize that expenses like hotels, entertainment and food will likely take a bigger chunk of your travel budget than before the pandemic.
Rental cars will likely cost significantly more, and opting out of this expense altogether could be a smart money move. And there’s a good chance that airfares will cost less.
Planning can minimize inflation's toll on your vacation budget
With airfares still low and rental car prices soaring, perhaps you skip the road trip this year. Fly into a public transit-friendly city like San Francisco, New York City or Boston. If you prefer small-town vibes, ferry to a mostly car-free island like Catalina Island, California, or Mackinac Island, Michigan.
Even though airfares cost more on average today than in the pandemic’s early days, you can take some solace in the fact that you’re more than likely saving on airfare this year than you were pre-pandemic.
A previous version of this article included incorrect data in charts and text. The charts have been removed and the text has been updated.
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