Travel prices ‘will continue to go up’ due to staffing issues: Trivago CEO

Updated

The price to fly is sky-high. While the July consumer price index (CPI) report showed airline fares falling 7.8% from June, plane tickets have soared 27.7% on a year-over-year (YoY) basis.

Trivago (TRVG) CEO Axel Hefer discussed the state of the travel industry, the demand for travel, and rising travel costs.

“I think that the costs will continue to go up,” Hefer told Yahoo Finance Live. “You see a fundamental shortage of people in travel and hospitality, and the reason is that a lot of companies have actually reduced their staffing during the pandemic.”

Labor shortages have caused turbulent conditions in the travel industry. The Bureau of Transportation Statistics quantified that 88,161 flights have been canceled so far this year, with many being attributed to staffing issues.

Supply is not keeping up with demand, according to Ravi Sarathy, a professor of international business and strategy at Northeastern University. The summer season is putting pressure on airlines, which are operating with fewer personnel and planes than pre-pandemic levels.

“[Companies] are now struggling in very tight labor markets to staff up again. So they will have to pay up, and that cost will be passed on,” Hefer added.

Seven thousand jobs were added to the air transportation industry per the July jobs report, but Hefer said more employees need to be staffed to meet pent-up demand.

Tens of millions of Americans have packed their bags this summer. The Vacationer’s annual travel survey quantified that 80% – or 208 million – of Americans intend to travel this summer, which is 35 million more than 2021’s survey results. Of those willing to travel, more than 50% said they would take a plane to their destination.

TSA checkpoint travel numbers are also on the rise. So far in August alone, 14% more people used a TSA checkpoint than in 2021.

Hefer does see some bright spots for the future of the travel industry.

“I think it’s likely that there will be some softness going forward, but it will be very unevenly distributed. For example, if you’re hit by energy cost increases and your disposable income is coming down, you will still want to go for a trip, so you will compare prices more and might save on transportation and allocate a bigger portion of your budget to the accommodation which you can’t save on.”

Yaseen Shah is a writer at Yahoo Finance. Follow him on Twitter @yaseennshah22

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