Gas Prices, War & Risks for the Recovery of Travel

Head of Research and Insights
Published 3/16/22
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Early 2022 initially saw a brighter outlook for the recovery of travel and tourism as the Omicron variant rapidly advanced the pandemic, hopefully to a post-pandemic state. However, events of late February and March have considerably clouded the full recovery of travel.  Based on research from our partners at Longwoods International and Destination Analysts, and insights from partners such as the World Travel and Tourism Council, this blog summarizes six insights on what it all means and six recommendations on how DMOs and tourism organizations should respond.

The Impact of Gas Prices, Inflation and International Events on Travel and Tourism

Gas prices in the U.S. (above) and around the world are approaching record levels. Source: U.S. Energy Information Administration

Miles Partnership and Longwoods International looked at the impact of a number of these events in the March 8 edition of our Travel Sentiment Study. This research reinforces six critical themes that are clear in the impact of recent events:   

1. Gas prices in the U.S. and around the world are approaching record levels. These levels have not been seen since the period of elevated gas prices 2008 to 2014 (see graph above).

2. Gas prices will likely impact the robust recovery of travel in the U.S. and around the world.  As of early March, a record number (since pre-pandemic times) of American travelers have plans to travel in the next six months (92%). See slide 3 of the March 8 (Wave 57) research.

3. More than half (51%) of American travelers are now saying transportation costs are of concern. 59% specifically say gas prices will impact their travel plans in the next six months. See below and slide 4 and 8 of the March 8 (Wave 57) research.

4. Driving vs. Flying. These issues are on top of lingering concerns around COVID-19 for a small proportion of U.S. travelers and will likely extend a preference seen during the pandemic of substituting driving for flying. See slide 3 of the March 8 (Wave 57) research.

5. Shorter Road Trips. High gas prices are already impacting trip planning for the summer “drive season,” likely shortening or otherwise reducing planned road trip plans for the next six months.

6. Real Time Impact on Road Trips. There are already indications of the impact of gas prices on road travel. One good source, Arrivalist and their Daily Travel Index tracks road trips across the U.S. with the year-on-year growth slipping slightly over the last month.

Recommendations for Destination Marketing and Tourism Organizations

These events highlight a mix of both immediate impacts that affect short-term marketing and promotion for 2022 and some critical long-term issues that also need to be addressed by our industry:

1. Shorter Road trips. U.S. travelers are likely to respond to elevated gas prices by shortening their road trip plans, highlighting the importance of prioritizing shorter drive markets in your marketing and advertising (e.g.: 250 miles or less).

2. More Fuel-Efficient Rentals. Rental vehicles are already in short supply and gas prices will increase demand for smaller, more fuel-efficient vehicles and for electric vehicles (e.g.: Hertz’s Tesla fleet. DMOs should connect with their rental vehicle partners to see if/how they can support the supply of these rental options in your market.  

High gas prices will likely drive increased demand for fuel efficient rentals including electric vehicles in your market.

3. Airline Impacts. Airlines are already raising prices in response to robust forward bookings. Increased fuel costs will only accelerate these price hikes which in turn may blunt some demand, especially on routes with limited competitions. Talk with your airline partners about their recovery strategy and how they can offer affordable fares on some flights and/or how you can support them bringing more capacity onto routes. See ADARA’s Traveler Trends Tracker for real time data on airline and hotel flight bookings for the U.S. and other parts of the world.  

4. Domestic Substitution and International Opportunities. The events in Eastern Europe will continue the trend of U.S. travelers substituting domestic trips for planned international travel and/or encourage the recovery of international inbound travel to the U.S. from Europe. This means revisiting and investing in your international travel marketing plans sooner rather than later.  

5. Value is More Important Than Ever. Gas prices are one part of wider inflation that is creating an affordability concern for many U.S. and international consumers. Destinations and their industry partners will need to work hard to ensure that their destination is seen as affordable, e.g.: highlighting value in accommodations, activities and attractions, and dining options, etc.

6. Migration to Electric Vehicle. Longer term, high gas prices will put added impetus for the migration to electric vehicles, a challenge and opportunity discussed in our white paper series on climate change action for DMOs, “26 for COP-26.” (Part 2, Actions #14 & #15).

A Final Thought: Building Back with Resilience.  

The war in Ukraine has added to the risks in our industry already highlighted by the pandemic. Travel and tourism can be severely impacted with little or no notice, by international events, health crisis and extreme weather events, the risks of which are all on the rise. Current events have further emphasized the critical importance for tourism to build resilience to better manage and mitigate these risks. Resilience is a fundamental part of tourism “building back better.”

Ensure you have Plans B and C for your marketing and other activities, that your crisis management plan is up to date and that you are investing in making your DMO and tourism industry partners more resilient to future shocks, for example, by building reserve funds. Building resilience and sustainability, were key themes discussed in our “Funding Futures” research on best practices on tourism taxation and DMO funding. See this blog for a summary and eight critical recommendations.   

The end of the pandemic is also a reminder about the critical importance of building back with resilience.