Why are vacations so expensive? Blame business travel (or lack thereof)

Upon returning from the trip, you might start to feel a shock on the airline ticket stickers.

It’s not necessarily because more and more people are going on vacation, although they certainly are. This is more likely because fewer people take business trips.

And when business travelers aren’t traveling, leisure travel can become more expensive. It may seem counterintuitive, but these paid travelers tend to help subsidize leisure travel.

The impact of business travel on leisure travel

There are two key areas where leisure travelers and airlines feel the absence of business travel.

Revenue: Business travelers spend more

While leisure travelers seek out basic budget plane tickets for inexpensive Las Vegas getaways or jump on deals for travel still a year away, business travelers typically buy at the last minute and spend. much more.

And that’s not even necessarily because they’re more likely to travel first class. According to an analysis of International Air Transport Association data by American Express AXP,
+1.02%
Global Business Travel, business travelers spend more on the same economy seats as their vacation counterparts.

To see: Do you need your vaccination card to travel to the United States? It depends.

Looking at spending on economy class flights between the United States and Europe in 2019, American Express found that business travelers spent 63% more than leisure travelers on the same type of ticket.

There are several reasons why business travelers spend more.

Business travelers value flexibility

These are the people willing to pay for the peace of mind that their tickets can be changed or canceled at the last minute.

For example, a Fall 2020 NerdWallet analysis from Southwest LUV,
+ 0.54%
Airfares revealed that Southwest Business Select tickets – which are fully refundable and can be changed to day travel even if seats are available – are, on average, 349% more expensive than the cheapest Wanna Get Away fares. airline for the same flight route.

While Wanna Get Away fares can be waived, refunds are issued as Southwest travel credits, rather than as a refund.

Business travelers tend to book last minute

“Pleasure travelers tend to plan – and book – vacations further afield, but most business travelers book a month or closer,” says Jeremy Quek, senior consultant for American Express Global Business Travel.

While there are last-minute travel deals out there, most experts agree that booking in advance, especially plane tickets, means better deals.

Availability: business travelers increase travel demand

With business travelers paying more, airlines lure vacationers with offers to fill the remaining seats. But that’s not the only reason business travel is good – there’s flexibility, too.

The increased demand from business travelers means that airlines are offering more routes. More routes mean that leisure travelers can choose more favorable times to fly – perhaps an earlier flight to avoid paying extra for late check-out from a hotel. Vacationers can travel to a smaller regional airport, closer to their resort. Flexible vacationers can choose the route with the cheapest airline ticket.

But COVID-19 has forced airlines to cut many routes. Another study by American Express Global Business Travel looked at the number of routes between two airports: Boston Logan Airport and New York-LaGuardia Airport, which Quek says is an important route for travelers from around the world. ‘business. In the second quarter of 2021, the number of available flights was 78% lower than in the same period in 2019.

“Historically, in this market, leisure activities could have expected 25 to 30 flights per day in each direction,” explains Quek. “It’s not just a question of price, but also of timing.”

What is holding back business travel?

An analysis conducted in June by the US Travel Association found that about 35% of US companies currently take business travel.

Business travel has plummeted and has struggled to return, for reasons such as border closures, quarantine warrants and COVID-19 testing requirements. The US Travel Association also cited confusing regulations and an uneven patchwork of state and local guidelines governing large gatherings as contributing to the decline.

And here’s a big one: fewer conferences and other business events.

Travel spending for large meetings and in-person business events fell 76% in 2020 from 2019 – a loss of $ 97 billion – according to the US Travel Association report. According to a 2021 survey by research firm APCO Insight, 81% of people who attended work-related events and conventions before the pandemic said they no longer did so.

Business travelers will be demanding on their return

When business travel returns, it will be complicated. Employees demand benefits in the name of COVID-19 security, including the ability to choose direct flights, stay in four- to five-star hotels, and select premium seats, such as first or business class, depending on responses to a survey of 3,850 companies. travelers conducted in the spring by Wakefield Research for travel company SAP Concur.

Many of those requests come from young workers, more than half of whom said they would ask to limit business travel or seek new positions if their companies did not implement policies to protect their health.

And these aren’t the only requirements that could complicate business travel. Of those surveyed, 62% of those surveyed said they would require full vaccination from clients or colleagues they visit.

The silver lining

With fewer business travelers booking Business Class or First Class seats, it’s more likely you’ll get an upgrade if you have Elite status or have points to redeem.

And while business travel is slow to return, travel as a whole is coming back. Over the weekend of July 4, the Transportation Security Administration saw more than 10 million passengers pass through security checkpoints across the country, with some airports exceeding 2019 travel volumes. Likewise, the US Travel Association predicts that domestic leisure travel will reach 99% of its pre-pandemic peak by 2022.

“People’s confidence to travel again has improved dramatically,” Quek says. “We have absolutely no doubts that business travel will come back. The biggest note is just the rate at which it will do it.

To see: Is it too late to close a hotel deal this summer? Not if you follow these foolproof tips

To find out when and where travelers can expect prices to rise, take a look at the competitive landscape.

“Pay attention to routes where there have been significant changes in capacity or schedules,” explains Quek.

On lines where competitors or schedules have been cut, expect prices to increase.

So far, a busy summer holiday season has led airlines to add routes. Southwest is announcing that it will resume flights to all of its previously served international destinations by November 7, with a focus on flights to beach destinations including Hawaii, Costa Rica and Florida. Delta DAL,
+ 0.83%
looks at international routes with relatively few travel restrictions, including Croatia, Greece, Iceland and Italy.

Read: I traveled overseas as the delta variant of COVID-19 increased. Here is what I wish I had known before my trip.

But business travel may not return to pre-pandemic levels by the end of this year. And if not, then the airline ticket business model is in jeopardy.

“Fewer competitors, fewer routes and fewer choices mean prices will go up,” Quek says. “Business travel is absolutely essential to the health of travel in general. “

More from NerdWallet

Sally French writes for NerdWallet. Email: [email protected] Twitter: @SAFmedia.

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