Americans aren’t bailing on their travel plans despite inflation

Yahoo Finance Contributor Vera Gibbons discusses summer vacation trends as travel costs rise and the outlook for rental vacancies.

Video transcript

DAVE BRIGGS: Vacation plans in focus on this first day of summer. And like everything else, these days, it's going to cost you a lot more than summers past. Yahoo Finance personal finance contributor Vera Gibbons here with the vacation rental outlook. Vera, nice to see you. Is inflation causing Americans to cancel vacations?

VERA GIBBONS: No. You know what? I spoke to a bunch of experts, and I thought they were going to say, oh, everyone's canceling. Everyone's bailing on their vacations. They're not. A lot of Americans booked their vacation plans at the end of last year. We're talking December 2021 or January 2022. A lot of these vacation plans are non-refundable. So they're sticking to their plans.

There is also this "live in the moment" attitude going on that's very prevalent right now because of all that we've been through and continue to go through. So people aren't bailing on their plans. They are going forward with them, despite the fact that the economy seems to be in a bit of a tailspin. They want to live. They want to live a little. And they want to enjoy their time with their family and their friends.

SEANA SMITH: Vera, there's been lots of talk in recent weeks that we have seen the vacation market starting to soften a bit. We had a guest on from Nest Seekers a few weeks ago, and she was saying that the rental-- the price of rentals out in the Hamptons, they're down by about a quarter of a percent. Is that consistent with what you're seeing?

VERA GIBBONS: I know. I was surprised to see that the Hamptons are now lowering prices for their summer rentals. That was very surprising. I think part of the reason is people went to the Hamptons. They bought houses there, and they're not actually renting them out. So that's cut into the inventory. But for the most part, the summer rental vacation home market, in and of itself, is not softening. The demand is still very strong.

Eating into the inventory also is the fact that people are staying longer. In fact, if you look at vacation home rentals for June, July, and August versus same period a year ago, 24% longer because of the work from home policies. So people are extending their stays, staying put, less inventory because people have bought in these markets and are not renting them out, particularly in some of the country's hot spots, which would be up and down the coast, the Jersey Shore, cape, islands, anywhere where there's a lake or a beach, I mean. So the Hampton story came as a bit of a surprise. I think that's sort of an isolated area altogether for some reason.

DAVE BRIGGS: So we had a guest on from Hopper that told us the second two weeks in August might be the one time to find some deals if you're willing to wait. If not, push it off into the fall. Where do you see everyone going? And what is left out there for those that are late planners?

VERA GIBBONS: Actually, that's good advice, Dave. Wait until the end of August or into September, because there is some availability there. But for the most part, the good stuff in those prime locations, that good stuff went at the end of last year or early in 2022. Again, people have been booking earlier and earlier. They wanted to get away.

So if you are looking for a last minute availability, I did speak some to the experts at Vrbo and some of these other experts. And they say some availability still in Asheville, Savannah, Scottsdale, where home rentals are actually 40% cheaper than the more popular vacation rental locations, like Hilton Head, Charleston, and Palm Springs, which continue to be uber, uber hot.

They also said that there's some availability in those low season places like the mountain destinations and the ski towns, so maybe the Poconos in Pennsylvania or Breckenridge, Colorado, but not Aspen. You know, I'm hearing anecdotally, like Aspen, Vail, forget it. Like, it was jam packed last summer. And people are telling me it's expected to be jam packed yet again.

I mean, if you think about it, the home is really central to the vacation experience. People want to settle into their Vrbo or to their Airbnb with their family, with their friends. And if it means cutting the budget elsewhere, maybe not eating out as much or not shopping as much, if people are worried about inflation, worried about losing their job, all of this stuff, then they will make necessary cuts once they get to their location and have their summer vacation as planned.

SEANA SMITH: Still on a bad list, though, of some areas around the country that still have some room here this summer if you are looking to plan a vacation, and you haven't gotten around to it yet. But Vera, if people aren't traveling this year, they're looking to make plans maybe for 2023, when is typically the best time to book your summer travel plans?

VERA GIBBONS: A lot of people book as soon as they're done with their summer vacation rentals the year before. So if they're vacationing the next two weeks of July, over the 4th, then they will book ahead for the following year. People really like to get a jumpstart on it. All of the experts I've spoken to say that the bookings have become earlier and earlier and early, which has cut into the inventory.

And that's likely going to be the case, although, again, there's a lot of economic uncertainty right now. So it'd be interesting to see how things pan out for next summer, because I think people are now getting a little bit nervous about potentially losing their jobs, potentially a recession coming. So there is a little bit of anxiety in the air.