How to Account for Inflation in Your 2022 Travel Budget -- Part 1

Inflation is crushing almost all aspects of Americans’ budgets — including their vacations. Prices rose on average 8.5% for the past 12 months ending in March 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 March 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 last year was. 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 2022 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?

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 $1,814, on average, for travel during the 2021 holiday season, according to a September 2021 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 a 2021 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. Analyzing February's inflation readings — and pairing those numbers with August data from the same year to account for seasonality — we were able to see which pieces of vacation budgets rose and which ones dropped.

Next week we will take a look at how those numbers shook out for airfare, travel lodging, rental cars, dining out and entertainment (like movies and concerts).

(Partially reprinted from nerdwallet.com.)