Why is travel getting more expensive? We asked the experts

Inflation is on everyone’s mind. In addition to booming post-pandemic demand, it has pushed up holiday prices — worsened by conflict in Eastern Europe and the Middle East triggering fuel price spikes and supply shortages. Between July 2023 and July 2024, the cost of a European package break went up by an average of 6.6% according to EU agency Eurostat, and similar trends are forecast for flights and hotels. From 2025, there are also ancillary costs such as new tourist taxes on the horizon. But is it all bad news?

What’s making flights cost more?

In its October 2024 budget, the UK government announced that, from 2026, air passenger duty for anyone aged over 16 will increase by about 15% to ‘account for previous high inflation’. While the tax on domestic and short-haul flights — in economy, £8 and £15 respectively — looks modest, it’s £102 and £106 each way for mid- and long-haul. Meanwhile, France has proposed to triple its aviation tax from 2025 to address a budget deficit, with the price of an economy ticket up to £33 pricier for long haul, and Denmark will launch a new flight tax in 2025 as part of its green transition — this will be phased into effect, costing up to £45 by 2030. Though paid by airlines, the cost is ultimately passed onto passengers.

What else?

After certain versions of Boeing 737-9 MAX jets were grounded over safety concerns in January 2024, the US Federal Aviation Authority banned makers Boeing from ramping up production, hampering the company’s ability to meet delivery schedules. Airbus also struggled to stay on schedule due to a shortage of engines and other components. The resulting lack of new aircraft has impacted airlines all over the world, with not enough supply to meet customer demand, ultimately meaning higher prices for consumers.

What about the green transition?

From 2027, most flights will be subject to the International Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme, which requires airlines in its 126 member states to offset growth in CO2 emissions above set levels. Fuel suppliers at European Union airports will also need to increase the Sustainable Aviation Fuel in their mixes — comprising 2% from 2025 and going up to 70% by 2050.

All this will mean additional costs, partly due to the necessary technological upgrades. But Martin Nolan, Skyscanner’s sustainability expert, says it should only have a “modest impact” on passenger fares. “Ultimately, supply and demand will always be the key driver when it comes to ticket prices,” he says.

What about hotel prices?

Spiking worldwide since 2022, the ‘revenge travel’ trend — making up for lost time post-pandemic — pushed demand sky high. But there are more reasons for this. In Japan, for example, the weak yen drove incoming travel and therefore demand, particularly from its East Asian neighbours. In New York City, government policy reduced supply. Previously, Airbnbs accounted for 10% of accommodation, according to The New York Times, but recent crackdowns on short-term rentals have forced a shift back to hotels, increasing demand. Higher operating costs caused by post-Covid staff shortages and soaring energy prices have also obliged operators to put up prices.

While room rates will continue to rise in 2025, the latest Hotel Monitor report from Amex GBT Consulting predicts they’re set to level out thanks to a record number of properties being built worldwide. More than 2,500 new hotels are expected to open by the end of 2024, with an additional 2,700 by the close of 2025.

Are there any other costs?

Tourist taxes have become common, and Thailand will join the 60-plus list of charging destinations from mid-2025. Meanwhile in Venice, the day-tripper tax introduced last April will increase from €5 (£4) to €10 (£8) in April 2025 for those who don’t pre-pay. “I can see beach destinations, not just cities, implementing tourist taxes soon,” says Paul Scott, founder of My Budget Break.

More countries are also using electronic travel authorisations to vet incomers, following the US, Canada and New Zealand’s lead. The EU is expected to launch its long-delayed version, the European Travel Information and Authorisation System (ETIAS), in 2025. Users will pay €7 (£6) every three years to keep their ETIAS valid.