The recent rises in the price of gas are unlikely to deter Americans from traveling, analysts say.
Even so, for those feeling financially strained, this is just another cost-of-living increase to figure out.
The price at the pump has increased significantly across the country, as well as around the world, following the United States' and Israel’s war against Iran. The price per barrel of oil jumped initially after the first bombardments but settled after a few days. It jumped again as the war continues on over fears of it dragging on and Iran placing mines in the Strait of Hormuz, a supply chain chokepoint through which 20% of the world’s oil passes.
Historically, gas prices have not been a major deterrent of U.S. travel, said Isaac Collazo, senior director of analytics at STR.
“The hotel room is going to cost you more than the difference in the gas,” he said. “That’s why, in the past, every time we’ve looked at this and we’ve done correlation, it doesn’t play into it because the other aspects of travel are where the money’s going.”
At the time of the interview on March 10, AAA’s national average gas prices list had the current average for regular gas at $3.53 per gallon. A month prior, it was $2.92 per gallon, meaning an increase of 61 cents or about 20%. That means the difference between filling up a 20-gallon tank before and after the start of the war at that time was about $14.
The cost of gas is not the biggest component of a road trip, Collazo said.
Now, what may be different this time around is that things are overall more expensive due to the effects of years of higher-than-normal inflation, Collazo said. Lower- and middle-income individuals are feeling the squeeze on multiple sides.
In the past, when inflation wasn’t so high, a spike in the price of gasoline didn’t make much of a difference in travel demand, he said.
“This time, over the last year, over the last six years, we've seen a very high cost increase in the cost of living,” he said. “So, this time, we could see some impact. But again, the impact would be limited to certain middle-income households and then lower-income households.”
Even then, it will be the overall higher cost of living that will be what makes financially stressed consumers decide not to travel, not the price of gas alone, he said. There may be some on the margins who point to gas prices as the reason why, but they won’t make up a major part of that group.
Even with the higher gas prices and economic stresses on some households, there are some insulating factors for the hotel industry, said Aran Ryan, director of industry studies at Tourism Economics. One is that higher-income households are the most important for hotel demand. Data from Tourism Economics and the U.S. Bureau of Labor Statistics show that, based on a three-year average through 2024, the top 20% of households by income account for 51% of lodging spending.
The U.S. is also in its tax-refund season, he said.
“We’re at a point where tax refunds are likely to give some households an unexpected benefit,” he said, adding they are expected to be 20% higher this year on average. “I think that, for some people, is going to spark some additional travel spending when they see that unexpected benefit.”
In early March, United Airlines CEO Scott Kirby said at an event at Harvard that he expected a spike in fuel prices would have a “meaningful” affect on its first-quarter financial results, CNBC reported. It’s the airline’s largest expense after labor.
“If it continues, we’ll feel it in [the second quarter] as well,” he said, later saying he thought the increased jet fuel prices would affect airfares quickly.
Ryan said that while he doesn’t know exactly how much the higher fuel costs airlines will need to flow through to higher ticket prices, there isn’t much margin there so they will need to pass it on to travelers.
Though this in itself may not be the deciding factor, “when stuff costs more, consumers tend to buy less of it,” he said. “We shouldn’t really ignore it, even though it’s hard to call out the particular example where maybe if the plan ticket is $20 more, you still take the trip, but those effects do happen.”
The ongoing worry is if the war in Iran drags on longer and becomes larger and leads to a longer sustained increase in gas prices,” Ryan said.
“That’s more concerning,” he said regarding travel demand. “I think also the speed of the increases. When that happens quickly and consumers pay attention to it, you have a little bit of a risk of a greater impact becomes top of mind.”