Ian Raine February 02nd, 2024 462 views
Every month, Cheeky Trip analyses over 66 million holiday prices and tracks them in a Holiday Price Index (HPI). Comparison with the latest Consumer Price Index (CPI) figures released by the ONS shows that holiday price inflation was significantly higher than consumer price inflation for the first half of 2023 before falling lower in the second half of the year. In contrast, 2022 shows the reverse; holiday price inflation was lower than consumer price inflation at the start of 2022 and considerably higher by the end of the year.
So why could this be? Holiday price inflation was negative in early 2022 due to COVID restrictions limiting travel and suppressed demand as a result. As the world started to open up more through 2022, holiday prices began to rise. Holiday price increases peaked at 59% in August 2022 compared to August 2021. After a year of high holiday price inflation, July 2023 saw the HPI at 2.7% compared to 6.8% CPI – the first time holiday price inflation had fallen below consumer price inflation since the world opened up again in spring 2022.
Holiday Price Index vs Consumer Price Index 2022. Picture Credit: Cheekytrip
Holiday Price Index vs Consumer Price Index 2023. Picture Credit: Cheekytrip
“The volatility in the holiday price index is indicative of just how heavily travel pricing is influenced by supply and demand,” says Steve Campion, Managing Director at Cheeky Trip. “Travel providers commonly use a dynamic pricing model. This means that prices change regularly to adapt to market conditions. When demand is high or supply is low, prices tend to increase to maximise margins. And when demand is low or supply is high, prices tend to decrease to shift excess capacity,” continues Steve. “So it makes sense that throughout the COVID period, travel operators would have been forced to lower their prices, which would lead to high percentage increases the following year as prices returned to more “normal” levels.”
Steve also commented on the comparison with the CPI, “It is interesting to see the correlation between the fall in the CPI below 7% and the fall in the HPI to a reasonable 2.7% in July 2023. While holiday prices will always have some level of volatility, the latest figures will hopefully boost consumer confidence somewhat. Hopefully we will see consumer inflation reach optimimum levels of around 2% in the near future and we will certainly look at how the HPI compares when that happens” says Steve.