Travel agent groups have been chatting online about concerns over 2021 ticket prices on the already beleaguered, here’s what they’ve been saying.
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What Agents Are Seeing
Travel agents have reported in various online groups that prices they are seeing for customer trips in 2021 are much higher than expected. Some agents are looking for replacement itineraries for canceled 2020 trips, others are optimistic about the vaccine.
Agents seem to be the most surprised by premium international rates that exceed expected ranges based on historical rates despite shockingly cheap domestic travel.
Walt Disney Resorts and theme parks in the United States with the exclusion of California have high interest for the coming year.
Why This Might Be The Case
Some routes I researched appeared to verify the claims. Hong Kong from the east coast was about 15-25% higher this year in business class than last year, though coach was cheaper. To South Africa, I found the same slight increases over last year’s numbers despite more direct flights like the one Matthew just flew.
Agents have been asking how this could possibly make sense given the historically low demand. To me, it seems quite clear. Inventory will be substantially lower than it has been in the past, not least of which on long haul international flights. Airlines are more likely to add back capacity only as and when it is entirely necessary instead of flying routes without substantial demand. Less seats to sell, higher prices per seat would seem to be the order of the day.
Why It May Be Premature
Near term flights show price incentives to book, and airlines could be postering. If any number of conditions (vaccine, antibodies, masks, shutdowns, herd immunity, etc.) work and Covid-19 infections decrease, airlines will be all too happy to add flights back in a new landgrab for routes and customers.
It also depends on whether the market responds to price incentives. Aspects of the US market indicated whether the risk of seeing family and contracting/transmitting the virus was a substantial threat, it wasn’t enough to keep them home for Thanksgiving even without price concessions. Covid-19 fatigue may set in. Even the Denver mayor urged people not to travel… from the airport for a non-essential trip to see his family. Fathers like him may decide that seeing family is essential.
If demand increases, so will frequencies creating more open seats to discount and return prices to 2019 levels or below.
Conclusion
Travel agents have discussed that they are seeing higher ticket prices in 2021. It’s likely due to low available inventory until flights get added back. If mitigation efforts lower Covid-19’s infection rate, more flights will return to the schedule possibly lowering ticket prices. However, if there is no change, those who travel, even with a vaccine may pay more for the privilege in 2021.
What do you think? Will ticket prices be higher in 2021 or is this just an aberration?
I suspect another possible aspect is that the airlines think that premium cabin long haul travel is being booked by people who are to a degree price inelastic. And since those people are going to fly anyway they might as well try and make more money off those customers.
I am expecting that by July/August consumers are going to be shocked at fares, lack of award availability, and the sheer number of people traveling. The big one being Europe/U.S. So many factors will contribute to it all at once. By then you will see a significant portion of the world vaccinated and Covid being almost completely under control (my prediction) leading to the natural of a pent up demand like we have never seen before. While it will mostly be leisure travel, there will be plenty of high end luxury travel to fill even the premium cabins. Further, the airlines will be cautious about ramping up too many flights, preferring to go slow and not bring back as many planes and employees right away should the vaccine prove to be shorter lived and a small spike in Covid happens again in the fall and another period of new vaccinations. Finally, airlines will see it as a cash grab given how much people saved the past year in travel and their willingness to pay anything to travel again.
I see it like a yo-yo for a few years. Cash grabs and periods of insane demand when the vaccine is working at its best. Leading to down times of little travel when even the smallest uptick in Covid appears and sends leisure travelers and Governments into another panic until they can vaccine everyone again. This from reading the past few days that the Pfizer and Moderna have a 3-4 month period of antibodies which then begin to fade. With that, this Yo-Yo effect in travel could mean 3-4 month periods of virtually covid free living and wild demand, with another 3-4 month period of hunkering down. Airlines and hotels are going to have to figure out how to balance this. Clearly, the easiest way is to create a seasonal model of outrageous pricing during the demand periods. Seasonal staffing could also be the new normal.
I should add, given your new advisor venture, Kyle. There will also probably be a lot of sweet spots to consider that will not recover with potential pent up demand and probably have plenty of cheap fares and good deals. Europe will be a mess of travelers for sure. I don’t even want to think of Vienna this August after the quiet summer I spent there! But consider:
1. China. I doubt it’s on many people’s wish list for awhile.
2. Russia. The same.
3. Brazil. It is brimming with undiscovered properties that are quite unique and still under the radar. And the dollar is outrageously strong there.
4. Middle East. I imagine there will be good deals as Emirates, Etihad, and Qatar all battle it out to stay alive. And so many great new luxury resorts and properties to select from.
The areas to avoid will be easy access regions like Europe, Hawaii, Central America or Mexico, and the Caribbean. People will flock to something perceived as more exotic than Florida but still want to be relatively close and feel secure.
It’s an interesting one and not clear cut yet what happens.
The types of people who were the more prolific purchasers of airline tickets (wealthier & professionals) pre covid also tends to overlap with the people whose pandemic has been working from home with lower outgoings and load of vacation days to rollover. This is a recipe for materially higher leisure travel demand once vaccines become widely available… Even if 10-20% of former travelers say not for me still in 2021
Add to that; with all the layoffs and furloughs and plane retirements (esp long haul) airline capacity is likely to be constrained still..
But if business travel is down 50% on 2019 levels anything could happen with fares
Interesting times.
I’ve already written off 2021. Nothing will change. Hopefully by 2022 things will start returning to normal.