Yes, you can still travel on a budget during inflation

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I heard a podcast last week about how runaway inflation in Argentina made everyone party harder. Why? When inflation gets really bad, there’s no reason to save money for a later date because it will only be worth less. Thus, Argentines tend to spend their wages as soon as they arrive, fill bars and restaurants, and generally live for the time being. This is macroeconomic YOLO.

US inflation is not as bad – or as chronic – as Argentina’s. And the prices of many travel expenses have actually started to drop. Airline ticket prices fell 9% month over month, according to data from the September Consumer Price Index. Still, it could be some time before prices for anything, including airline tickets, hotels and rental cars, regain some semblance of stability.

According to a recent Tripadvisor survey, two-thirds of Americans cited “cost” as the most important factor affecting planning a fall trip. Yet despite inflation, half of respondents plan to travel more this season than they did in the same period a year earlier. So travelers aren’t delaying or canceling their plans so much as trying to stay on budget.

What should we budget-conscious travelers do? Give up and party like Argentinians?

Find out how travel prices have changed

It’s easy to talk about “travel inflation” as if it’s a monolithic force, but it’s just the law of supply and demand at play as always. And it didn’t affect all aspects of the trip equally.

At first glance, you might think the dark blue line in the graph above represents the hubbub around airfare this summer. But that line represents the cost of renting a car, which has gotten a little cheaper over the past few months, but is still 46% higher than pre-pandemic rates.

Hotels and airfare, while more expensive than they were for much of the pandemic, are almost back to baseline. And “out-of-home food” (e.g. restaurant food) has steadily and sneakily climbed as much as 17% above pre-pandemic prices, according to September CPI data.

What does this mean for travel budgeting? Your intuitive sense of the cost of renting a car in Hawaii — or ordering a steaming plate of loco moco — is probably wrong. And your worst expectations about the price of plane tickets and hotels are probably exaggerated.

It also means it will be easier to cut budgets by cutting back on plans that rely on car rentals or dining out. Booking a hotel room with a kitchen might not be profitable under normal circumstances, but it could be this year. And visiting a destination well served by public transport, such as a European city, will avoid those exorbitant prices for rental cars.

Lock in flexible pricing

Trying to figure out if it’s a good time to book a trip to avoid future price spikes is like trying to figure out if it’s a good time to buy stocks. The truth is, no one knows. Yet travel reservations differ from investments in one crucial way: they can often be canceled or changed if prices drop.

Flexible travel bookings can help you travel more cheaply. For example, let’s say you’re planning a trip later this fall and you’re wondering if you should book a hotel now or wait to see if prices drop. In reality, you can do both: book a flexible room rate now, lock in the price, then cancel and/or rebook if prices drop.

This is a heads-you-win, tails-you-win situation. If prices go up, you will have landed a lower rate. If prices drop, you can change your reservation and save. The same logic applies to rental cars and air travel, assuming reservations are flexible.

Beware of “flexible” bookings that have restrictions or other limitations. And don’t go wild rebooking every flight and expecting to cancel them later for your money. Airfare refunds are often issued in the form of vouchers or travel credits, not cash.

Use these points and miles

My colleague and I just analyzed hundreds of data points comparing the cost of travel using points and miles versus cash and found something surprising: the per-point value of most programs of travel rewards has actually increased in 2022. This means that points and miles are actually deflating as cash prices are inflating.

(Specifically, cash prices increased while point and mile prices remained less affected, which had the mathematical effect of increasing the relative value of points and miles.)

The thing is, now is a good time to use points and miles, especially those in programs that still use a rewards chart. Reward charts keep the price of points relatively stable and differ from programs that use dynamically priced rewards tied to the cash value of a given redemption.

Hyatt Hotels, for example, offers a garish value of 2.8 cents per point in our 2022 ratings, up from 1.9 cents per point in 2021. Much of this increase in value is due to its awards table. Marriott, meanwhile — which eliminated its rewards board earlier this year — is holding steady at 0.7 cents per point year-over-year.

In terms of budget, it’s always a good idea to compare point value to dollar cost. But in general, as long as spot prices are high, consider using rewards.

Skip the stress

Will travel prices continue to fall? Will car rentals be affordable again? Honestly, we don’t know. And unless you’re the type to budget for trips down to the last penny, you don’t have to try to optimize every travel expense.

Inflation may be on an upward trajectory, and while travel prices may be up across the board, that doesn’t mean you should blow your savings on a Maldives holiday. Your dollars aren’t about to be as useless as toilet paper. We are not yet at the Argentinian YOLO stage.

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Sam Kemmis writes for NerdWallet. Email: [email protected] Twitter: @samsambutdif.

The article Yes, you can still travel on a budget during inflation originally appeared on NerdWallet.

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