Image: Traveler in airport
Brendan Smialowski  /  Getty Images file
In addition to record gas prices causing rising airline ticket costs, travelers this summer will also face fewer flights scheduled.
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updated 6/4/2008 1:47:25 PM ET 2008-06-04T17:47:25
analysis

Save for perhaps a new house or car, few one-shot expenses cost more than a big annual vacation. By the time you add up airfare, hotel, rental cars, restaurant meals and admission to attractions, it's rare that you'll spend less than four figures per person on a vacation of five days or more.

So as goes the economy, so goes the travel industry — and this summer could be a tough one for travelers and industry insiders alike. Gasoline costs in particular could drive folks to decide, well, not to drive, and energy costs in general will keep expenses high across the travel industry, from airlines to roadside food stands. As a result, the tourism industry is facing its bleakest forecasts since the oil crisis of the 1970s. Here's a look at how it could shape your summer vacation plans.

Fuel prices drive everything else
As was the case three decades ago, fuel prices are all over the news, but only recently have most folks really started feeling the squeeze of truly high prices at the pump. In just the past week or so, many potential summer travelers have experienced only their second or third uber-expensive trip to the gas station. For example, I was treated to my first $80 gasoline outlay last week, and I trembled in my seat when I saw the final tally. You can bet I will be driving less.

For many, summer trips are still in the planning stages. I believe this will have a prohibitive effect on the travel plans of many summer revelers.

All that money that is going to oil barons and oil companies has to come from someone's pocket. This summer, it is going to be regular commuters, travelers and travel providers who empty out the till.

What's next? Trends to watch
I see this falling in out in the following ways:

1. Car travel will decrease dramatically. There's no question that gasoline will now become a budget item for most travelers. Even at $2, travelers mostly took for granted the cost of fuel when doing budgets, but at $4 it will be a completely different story. Squinting hard to see the bright side, you could predict that the recurring weekend crush of traffic could be a little more manageable. Meager solace, I know.

2. Short trips will become the coin of the realm. If you see this likely outcome as a reason to look for interesting destinations closer to home, rather than as a buzzkill, you might be pleasantly surprised; see more on this approach in "Tips for Summer 2008" below.

3. It might turn out to be cheaper to fly some moderate distances. For example, roundtrip from my town to Boston is 525 miles. At 20 miles per gallon, that's 26 gallons of gas, and at $4 a gallon, that's a little over $100 roundtrip. Add in tolls, and it's probably more like $140, not including wear on your car. I've seen some $160 roundtrip flights on the same route. There is still the ride to the airport to consider, as well as airport parking, but avoiding 8 or 10 hours in summer traffic might be worth the few bucks in the end.

4. As cost is going to be a primary concern for a large number of travelers, all-inclusive vacations will enjoy increased popularity, as they offer the closest thing possible to a fixed-price trip. Resorts could do particularly well because they offer extensive opportunities for diversion on the grounds without extra admission, fuel, parking or car rental fees. Booking a resort stay can be a reliable way to avoid unexpected costs and stick to a budget.

A more modest version of an all-inclusive vacation, air/hotel/car package deals are looking pretty attractive right about now, particularly for vacationers headed to very popular destinations where other costs can add up very quickly.

5. Europe may not seem so expensive after all. In recent weeks, there were a few price wars underway for transatlantic flights, so getting to Europe was a bit less expensive (if decidedly not “cheap” in most folks’ books).

Once you get there, gas prices may be high, but an extensive and efficient public transportation system means that you probably won't have to do much driving. As it gets more expensive to stay home, doing a budget for an overseas trip might be worth your time. If you are considering a trip to Europe this summer, check out our Top 25 Ways to Save on Europe Travel.

Hotels, restaurants and attractions
So if we have less money to spend, what happens to the travel and tourism industry?

  • Hotels will have fewer lodgers
  • Restaurants will have fewer diners
  • Attractions will have smaller crowds

The laws of supply and demand should dictate a decline in price, but exactly how this will play out still remains to be seen, for the simple reason that costs are up for everyone. Hotels will pay higher energy costs, as will restaurants, who will also be hit by surging food prices — so establishments working on narrow margins may not be able to offer big discounts this season. In the end we will probably pay more, proprietors will probably make less, and no one will really be happy about it.

Air travel
I believe we will look back on the summer of 2008 and say it was the best of times, it was the worst of times — but it's pretty certain we'll say it was the Summer of the Surcharge. I outlined thecurrent trend in surchargesa couple of weeks back, but even the pundits did not anticipate the latest move by American to charge $15 for the first checked bag. It's one thing to add charges for second bags and oversized bags, but to consider a checked bag of any sort as an add-on is a pretty bold step for an airline that has already ticked a lot of folks off this year.

The airlines are on their worst behavior since, well, the last time they were on their worst behavior (at the beginning of the decade).

They are piling on surcharges for things that have nearly always been taken for granted — like making reservations over the phone, obtaining seat assignments, booking "reward" travel and, now, paying for checked baggage of any kind.

They are engaging in predatory pricing strategies on popular routes, while gouging customers not lucky enough to live near a giant airport with lots of competition.

While we may see some discounted fares, the surcharges will stay the same. These add-on fees are exempt from any discounting, so even if you find a lower fare, the $15 for a checked bag still costs you $15.

Airlines are already canceling flights and even routes to cut costs, reducing customer choice. Just today, United Airlines said it is removing 70 fuel-guzzling airplanes from its fleet and is slashing domestic capacity as it attempts to cope with surging fuel prices. American Airlines recently announced it was cutting its schedule by 300 flights a day.

Customer service has become a complete misnomer by now — few airlines see us as the beloved customer anymore, and even fewer offer any level of service to speak of beyond an uncomfortable seat on the plane.

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So what about the "best of times" part? I believe the airlines know that a significant portion of their ridership simply won't show up if fares go up by more than 10 percent or so, and will be reluctant to price large numbers of fliers out of the market. Rather than cheap fares disappearing altogether, what we will see instead is fewer seats overall priced at the lowest fare amounts, as well as far fewer discounts for higher-dollar business and unrestricted fares.

In the short term, all the airline infighting, nickel and diming, and maneuvering will result in reduced demand and fewer full planes. Eventually airlines will be forced to offer rock-bottom fares for many seats — but I still believe we'll see fewer fliers in the air this year, and thereby many planes less packed to bursting with stressed-out, uncomfortable travelers.

Also, between the reduced number of airlines flying and route cuts by everyone else, there will be fewer planes competing for precious runway and gate real estate. Airport crowds should relent, delays may well decrease and life at the airport may be slightly less miserable. Maybe.

Finally, all these surcharges could lead to a more sensible pricing structure in which travelers pay for the services they use and not for those they don't. For example, if you have only a carry-on, part of your fare currently subsidizes your flight mates who have multiple pieces of luggage for which they pay no extra. With the surcharge approach, this might not be the case.

Of course, not all of the surcharges stand up to common-sense economics, as I outlined in our review of the new surcharges. Twenty-five bucks for a four-minute conversation with a representative is not really a surcharge, per se — it is more accurately considered a disincentive. Personally, I think the airlines would prefer to have us all pay as much as possible for as little as possible, and still add the surcharges on top of that. But let's look for the silver lining and hope that each traveler will eventually pay only for those services they use, and nothing more.

Worst days to travel
There is really only one big summer holiday — July 4 — and this year is going to be a doozy. When July 4 proper falls midweek, the peak travel period tends to be more diffuse, as some folks travel the weekend before, some the weekend after and others across the whole two-weekend stretch. When July 4 falls on a Friday, however, as it does this year, we have a true "holiday weekend," with everyone scurrying about on the same days. Thus, I predict Thursday, July 3, and in particular Sunday, July 6, will be rough days this year. I'd avoid travel of every stripe on these days if I could, including flying, driving and riding the rails.

Tips for summer 2008
Do smart searches. Prices are going to pitch and yaw all over the place as aggressive yield management tactics kick in, and you'll find that fares on the 5 p.m. flight could be a lot lower than those on the 6 p.m. flight or vice versa. Some travelers only check one or two booking sites before making their reservations, but I would do much more shopping around this summer, on smart searching sites like Fare Compare, Yapta, Kayak, Quikbook or our own Bargain Box. You have a lot of computer power at your fingertips, and you'll want to use it this summer.

Use the auction sites. There is an expansive yet hidden discount market to be found using auction and "name your price" sites like Priceline. If you want to talk about getting the absolute best price, this is the place to find it. You won't do better, particularly for things where one choice is much like any other, as with car rentals. It's all the same cars, parked on the same lots, from very similar companies, and there's no reason to pay a higher price than you absolutely must.

Visit winter destinations. Many traditional winter vacation destinations are working hard to come up with a "four season" approach to tourism. Ski destinations offer climbing, lake kayaking and music festivals, while Southern destinations maintain a steady calendar of activities and offer some of the best rates of the year.

Look closer to home. When most of us think about "vacation," we think not merely of getting away, but of getting far away. But there's nothing wrong with looking closer to home. Most Americans live within an hour's drive or so from a city or attraction that outsiders would consider a great time but that locals consider old news. For example, just because I can be in New York or Philadelphia in less than an hour on a train doesn't mean that I shouldn't consider a long weekend in either, putting the (considerable) money I could save on gas and airfare toward upgrading to a nicer hotel than I might usually choose. I had never considered it before, but I did just that this past winter and had a great and memorable weekend. When I stop to think about it, there are at least five or six different locations that I might visit if I drop the notion that vacation entails boarding airplanes to faraway places.

Wait it out. Finally, if you are feeling tremulous about summer travel, consider postponing your trip until the fall. Crowds will be smaller, the weather will be more temperate, fares will be lower, and we'll know a lot more about where fuel prices and the overall economy are headed.

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