A recent Bankrate survey says more than a third of Americans will take on debt to fund their summer vacation this year; of those surveyed, just over half will take a summer vacation in 2024. Meanwhile, the remainder of participants reveal they cannot afford to take a trip at all. The trend is not limited to stateside citizens — a Eurostat report shows that based on the 2023 data, nearly 30% of Europeans also struggled to take a one-week vacation.
For two decades, well-appointed American tourists participated in the “golden age” of air travel. By all accounts, the 1950s to the 1970s heralded a sugar-coated era for passengers — flying was an opulent experience, even for those in economy. First-class seat holders during these halcyon days could expect a five-course meal, huge chairs that transformed into beds, and exemplary inflight service.
While even the cheapest seats on a ‘50s flight might resemble business class today, air travel was only available to those in the middle-to-upper classes. Of course, access to travel has widened much over the past few decades. The latest perks comfort blue-chip airlines offer their richest customers makes it easy to imagine we are still in a golden age of travel. For those who have, albeit for those who have the funds to spend.
Vacation Debt Now Accepted
American travelers are more apt to use a credit card to cover their unaffordable getaways. A quarter of respondents say they will pay the fees back over several months. This scenario raises questions about such untenable lifestyle habits, though travel reward credit cards are effective for those who understand the cash-saving reward offers. For those who qualify, choosing the right card might even cover their flights for the year.
Nevertheless, Forbes argues that free air miles are only useful if applied to the correct airfare. If you add a free long-haul flight to seaplanes, taxis, and ferry trips, it will soon devour any savings made on a credit card’s travel perks. Some consumers may balk at the thought of annual fees on their credit card; these are soon forgotten if the holder takes advantage of offers like free baggage checking, worldwide insurance, or discounted car rental. However, such benefits may not appeal to a middle-class family that only holidays once a year.
Where Do Americans Go?
America is geographically isolated from most other continents. International travel is already less affordable outside the region. Naturally, more U.S. tourists favor a North American break. Nonetheless, of the Americans going abroad this summer, 50% will choose Europe, with 16% favoring the Caribbean, and 14% going to Asia.
There is good news for those buying flights, at least in 2024. Using Bureau of Labor Statistics (BLS) data, the U.S. Inflation Calculator shows that airfares dropped to an average -7.1% in 2024, down from 2022’s high of 30% post-pandemic air ticket inflation.
The Rising Cost of Vacations
Still, even as airfares return to pre-pandemic prices, other non-flight factors contribute more to the vacation bill. Multiplying these overheads by the average family size soon makes international travel difficult. Accrue Savings outlines what expenses a typical vacation abroad will accumulate:
Transportation, including airfares, public transit, car rental, gasoline, and parking fees.Accommodation, such as hotels, resorts, and guest houses. Food costs: groceries, restaurants, street food vendors, and beverages. Entertainment, such as sightseeing, excursions, and outdoor pursuits.Insurance and unexpected costs in the event of emergencies such as illness or accidents.
The Eight-Percent Rule
Growth strategist and CEO of boutique tourism advisory firm Strategy & Demand, Joshua Leibowitz, believes in the “8% Rule.” The theory goes middle-income families should allow 8% of their annual salary for a vacation. He insists they should plan well ahead of schedule and research all the locations that fall into the budgeted amount. He further believes a vacation is a must.
“First, the question is not whether you can afford to take a vacation this year,” says Leibowitz, “but whether you can afford not to take some kind of vacation.”
The Vacation Rental Solution?
Vacation rentals are more popular than ever in America. Vacationers in the United States contribute nearly $24 billion in revenue. Even though the vacation rental market share accounts for 10% of the American market, this will still be a quarter of the global share, and is expected to growing at a healthy rate this decade. While there are arguments for vacation rentals helping local economies, the home holiday lease phenomenon has incurred hurdles along the way, not least with its effect on countries experiencing housing crises and local tax irregularities.
The vacation rental industry has been under scrutiny in some regions. Airbnb met resistance in Italy — ironically, it has the highest vacation rental share in Europe. In November 2023, the Mediterranean nation confiscated €780 million from the company under suspicion of tax evasion. The case concluded with the rental giants paying a slightly lower settlement of €576 million. However, even with the market leaders making a subsequent $500 million net loss in Q4 of 2023, they increased annual net profits last year to $4.8 billion.
The Hotel Problem
As the vacation home leasing economy continues its rise, the effect on hotels may already be apparent. Travel industry research group Skift says the price of hotels and resorts has yet to recover from a volatile economic outlook. Though demand in the United States grew in 2023, supply growth was more than half lower, pushing prices up. PricewaterhouseCoopers (PwC) says hotel occupancy may recover in 2024; however, just as the tourist industry stabilizes after the disastrous pandemic, the continued conflicts in Eastern Europe and the Middle East mean customers may feel the pinch in the coming years.
