Anticipated surge in July Fourth holiday travel amid easing inflation trends

Travel activity is expected to hit record levels around the Independence Day holiday as travelers take advantage of more affordable prices for airfares, gasoline, and hotels. AAA projects that a record 70.9 million people will be on the roads and in airports from Saturday, June 29, through Sunday, July 7, marking the highest number since before the pandemic. This surge in travel comes at a time when consumers are cautiously spending on non-essential items, a trend that could affect the economy. Inflation has decreased notably on travel and vacation expenses, providing a favorable environment for travel.

The rise in summer travel, aided by the flexibility of remote work, is seen as a positive sign for the industry, particularly given recent positive updates from cruise lines. The presence of record numbers of travelers in airports is evident, with the Transportation Security Administration setting a new high by screening nearly 3 million people at U.S. airports on June 23. The agency anticipates crossing the 3 million traveler mark at some point during the July 4 holiday week.

Despite inflation affecting various goods, prices for travel-related items like airline tickets and hotel stays have significantly decreased compared to last year. Recent government inflation data showed hotel room prices were 1.2% lower in May compared to the previous year. Gasoline prices, a significant consumer expense, have also lessened from last year, with the national average now at $3.51 per gallon, down 2 cents.

Morgan Stanley predicts that Delta Air Lines, American Airlines, Marriott, and Hilton will likely see significant benefits from the increased consumer demand for summer travel. Cruise lines are also expected to thrive, with Carnival raising its profit forecast for the year, experiencing record bookings for 2024, and reporting all-time high customer deposits. Royal Caribbean has also adjusted its forecasts upwards for the year, reflecting a positive outlook for the travel industry.