Surging demand for travel and soaring fuel costs ‘a perfect storm’ for airplane tickets, cruise prices

Prices for flights, vacation packages and cruises are likely to rise due to soaring energy costs and pent-up demand for travel amid loosening COVID-19 restrictions.DARRYL DYCK/The Globe and Mail

If you’re pondering a vacation, you may want to finalize your bookings soon.

Soaring energy costs and the unleashing of pent-up demand for travel amid loosening COVID-19 restrictions are likely to push up the prices of flights, vacation packages and cruises.

“I call it a perfect storm,” said Martin Firestone, president of the travel insurance brokerage Travel Secure Inc. The combination of those two factors, he added, will likely send prices “through the roof.”

While the costs of flights, hotel rooms and other travel services fluctuate frequently, in some cases it’s already evident there’s an upward price trend.

Richard Vanderlubbe, president of Tripcentral.ca, an Ontario-based travel agency that focuses on international trips, said price increases for the vacation packages his company monitors started outnumbering price decreases on a daily basis in late January.

By the middle of February, when Ottawa announced it would relax key restrictions on international travel by the end of the month, price increases outnumbered decreases by 14 to one, he said.

In the weeks that followed, travel restrictions began to fall away, as promised. On Feb. 28, the federal government dropped its recommendation that Canadians avoid international travel for non-essential purposes. At the same time, it modified a number of pandemic rules, including one that required travelers to take expensive molecular COVID-19 tests before entering the country. (They can now opt for cheaper antigen tests.)


Change in average flight prices,

March 2022 vs. March 2019

Travel will likely cost more this spring and summer, though Canadians can still find deals, especially on popular domestic routes.

DOMESTIC ROUTES

(Overall 6% higher)

Top five most popular domestic routes

INTERNATIONAL ROUTES

(Overall 36% higher)

Top five most popular international routes

KAYAK considered searches originating in Canada for domestic and international travel from March 2–8, 2022 for travel between March 8–Sept. 8, 2022. To compare year over three years, KAYAK considered searches originating in Canada for domestic and international travel from March 2–8, 2019 for travel March 8–Sept. 8, 2019.

THE GLOBE AND MAIL, SOURCE: KAYAK

Change in average flight prices,

March 2022 vs. March 2019

Travel will likely cost more this spring and summer, though Canadians can still find deals, especially on popular domestic routes.

DOMESTIC ROUTES

(Overall 6% higher)

Top five most popular domestic routes

INTERNATIONAL ROUTES

(Overall 36% higher)

Top five most popular international routes

KAYAK considered searches originating in Canada for domestic and international travel from March 2–8, 2022 for travel between March 8–Sept. 8, 2022. To compare year over three years, KAYAK considered searches originating in Canada for domestic and international travel from March 2–8, 2019 for travel March 8–Sept. 8, 2019.

THE GLOBE AND MAIL, SOURCE: KAYAK

Change in average flight prices, March 2022 vs. March 2019

Travel will likely cost more this spring and summer, though Canadians can still find deals, especially on popular domestic routes.

DOMESTIC ROUTES

(Overall 6% higher)

INTERNATIONAL ROUTES

(Overall 36% higher)

Top five most popular domestic routes

Top five most popular international routes

KAYAK considered searches originating in Canada for domestic and international travel from March 2–8, 2022 for travel between March 8–Sept. 8, 2022. To compare year over three years, KAYAK considered searches originating in Canada for domestic and international travel from March 2–8, 2019 for travel March 8–Sept. 8, 2019.

THE GLOBE AND MAIL, SOURCE: KAYAK

The government also scrapped its requirement that children under 12 traveling with vaccinated adults wait 14 days before attending school or camps after returning from international trips.

The rule changes sparked a flurry of bookings for March and April from Canadians who saw a chance to flee winter with trips to sunny destinations, according to Mr. Vanderlubbe.

Like travel packages, airline tickets are also becoming more expensive. International flight prices for Canadians were up 36 per cent on average in early March, compared with the same period in 2019, according to an analysis of online searches by the travel-search website Kayak.

And the comparison with prepandemic airfares reveals staggering price increases for certain popular international routes, according to Kayak’s data. For example, the average price of a flight from Vancouver to New Delhi, India, was 83 per cent higher, compared with 2019. The price of a flight there from Toronto was 60 per cent higher.

Within Canada, domestic flight prices were up only 6 per cent compared with 2019. Many popular routes were still significantly cheaper than they were before the pandemic.

The average price of a flight from Toronto to Vancouver, for example, was nearly 40 per cent lower than it was three years ago, the data shows.

mr. Vanderlubbe offered two possible explanations for the lack of increases in the prices of domestic flights: demand for leisure travel within Canada usually doesn’t start to rise until later in the spring, and domestic demand for business travel hasn’t yet recovered from the pandemic.

Still, even on domestic routes, bargains may not last long, as airlines face mounting costs from spiking fuel prices.

After decisions by several countries to impose sanctions on Russian oil exports, the price of jet fuel has skyrocketed by 27 per cent in the past week, to more than US$141 a barrel. Compared with a year ago, the price has nearly doubled, according to S&P Global Commodity Insights.

The spike has already prompted airlines such as Emirates and Malaysia’s AirAsia to introduce fuel surcharges or raise existing ones.

Air Canada declined to discuss how fuel costs might affect its pricing. WestJet said it has no fuel surcharges in place and has made no changes to its pricing system in response to higher fuel costs.

Paul Jacobs, Kayak North America’s general manager and vice-president, said it may take a couple months for the impact of higher fuel costs to affect pricing.

Another corner of the travel sector that will feel financial pain from high fuel costs is the cruise industry, which is starting to see demand return after luxury liners became hotbeds of COVID-19 contagion. Canada relaxed its rules for cruise ship travel on March 7, though the government continues to recommend people exercise caution when traveling on liners.

Royal Caribbean Group said it will not be charging for increases in the costs of fueling its ships. Carnival Corporation did not respond to a request for comment on the possible impact of rising fuel prices.

In general, the extent to which Canadians will see price increases on travel will likely depend on when and where they’re going, Mr. Firestone said. Concerns about war in Ukraine could weigh on demand for trips to Europe, he noted.

He said there is no question in his mind that cruise lines, airlines and tour companies will eventually need to pass higher costs on to consumers.

The question, he added, is when.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast

Leave a Comment

Your email address will not be published.