Consumers are looking for ways to travel on tighter budgets. Many are ditching first-choice options like flights for cheaper ones, like long-haul bus rides. Others are just staying home.
Travel demand fell in the second half of last year, when even high-income households spent less on hotel rooms, Morning Consult recently found. It’s the latest sign that consumers are making tough choices when they run out of affordable substitutes for everything from airline tickets to eggs.
“All the additional costs associated with traveling — eating out, airfare, gas costs, items to be bought before the trip — are causing more consumers to walk away instead of making the purchase,” said Deni Koenhemsi, head of economic analysis at Morning Consult.
Those who aren’t walking away are increasingly tweaking their plans.
“I definitely have made some changes to travel based on pricing, timing, etc.,” said Ken Tran, 36, who works in marketing in New York City. He’ll often drop down a star rating on hotel bookings for short trips or hunt for Airbnbs for longer ones.
Tran also said he’s been opting for family visits outside of major holidays — traveling for Lunar New Year, for instance, instead of Christmas. If a trip is three hours or less, he added, he sticks with basic economy seats, often on buses or trains.
“Going around the Northeast, there are many more options for travel outside of flying, and when booked in advance, tickets are pretty reasonably priced,” he said.
Middle-income travelers are more likely to stretch their budgets so they can stick with their plans, but those with lower incomes are pulling back, Morning Consult found. This socioeconomic divide has been years in the making as the industry caters to its wealthiest customers and nudges everybody toward premium options.
After affluent consumers dominated the holiday travel season, their plans for the year ahead remain robust. Over 93% of those making at least $200,000 annually told the tourism market research firm Future Partners they’ll be doing as much or more leisure travel this year than last. By contrast, nearly 28% of those making less than $50,000 expect to take fewer leisure trips in the next 12 months, while just 15% of travelers overall said the same.
On the budget end of the market, consumers face trade-offs — like thinner amenities at economy-level hotels, where room rates have fallen, or downgrading from a domestic flight to a bus as intercity routes expand.
While demand for luxury hotels rose 10% last year, bookings in the economy sector were down 2%, according to Jan Freitag, national director of hospitality analytics at CoStar Group. Room rates at these cheaper properties were a modest 0.8% lower year over year as of December, he said. Daily rates for budget lodgings averaged $72.11 in 2024, down slightly from $72.69 in 2023.
Dishes that used to be served warm may now be a ‘heat it up yourself’ item.
Jan Freitag, national director of hospitality analytics, CoStar Group
But to keep prices steady, many operators are trimming costs to offset expenses for payroll, insurance, energy and more, Freitag said. Guests could already be noticing that at the breakfast buffet. “Dishes that used to be served warm may now be a ‘heat it up yourself’ item,” he said.
Suzanne Wolko, a travel blogger based in Philadelphia, said she’s been embracing more day trips to avoid paying for lodging.
“Costs have risen so much it has become a budget issue,” she said. Planning visits to Manhattan for events or Broadway shows, she often encounters $400 hotel rates that she considers “ridiculous for 3-star quality and service.” So instead, she’ll hop on a 90-minute train, spending between $17 and $32 each way when booked far enough in advance, and head home in the evening.
Domestic airfares are about 12% higher this month than in January 2024, according to the booking platform Hopper, which expects the run-up to continue. “Late spring and summer prices are currently forecasted to be above 2024 levels by double digits,” said Hayley Berg, Hopper’s lead economist, though she noted that last summer saw some of the cheapest airfares on record as carriers raced to fill seats they’d added during the pandemic rebound.
