Holiday 2020 Shows 2021’s Pent Up Demand

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Holiday 2020 Shows 2021’s Pent Up Demand

As we continue to explore where marginal consumption will rebound with a 2021 vaccine rollout, a look at US Holiday 2020 air travel patterns helps shed light on identifying sources of pent-up demand. A few points to frame this discussion:

  • Computer algorithms set ticket prices based on demand to maximize load factors and total revenues, so there is little human decision-making bias.
  • We looked at flights during the week before Christmas as a baseline, and then the weeks of both Christmas and New Year’s to measure price surges caused by pickups in demand during those periods.
  • We used New York, Los Angeles and Chicago as starting points. We then used Orlando as a common family destination (i.e. visiting grandparents and Disney), Miami as a popular leisure spot (i.e. fun night life activities), Honolulu as appealing to everyone (i.e. family or otherwise), and Los Angeles as a warm location to seek some reprieve from the cold.

Here’s what we found looking at this grid of typical US Holiday travel patterns:

New York – Orlando

  • Cost of a non-stop, round-trip flight from New York to Orlando from 12/16-12/20 (week before Christmas): $37 (not a typo)
  • Cost the week of Christmas from 12/23-12/27: $71
  • Cost the week of New Year’s from 12/30-1/3: $152

Takeaway: while round-trip ticket prices from New York to Orlando nearly double the week of Christmas compared to the prior week, the really noticeable surge occurs the week of New Year’s (up 311 percent from the week prior to Christmas).

New York – Miami

  • Cost of a non-stop, round-trip flight from New York to Miami from 12/16-12/20 (week before Christmas): $56 (also, not a typo)
  • Cost the week of Christmas from 12/23-12/27: $74
  • Cost the week of New Year’s from 12/30-1/3: $252

Takeaway: the pattern here is much the same as Orlando, only more so. The 4.5x increase in ticket prices from pre-Christmas to New Year’s week is remarkable considering NY’s quarantine guidelines, which would apply to all these trips.

Los Angeles – Honolulu

  • Cost of a non-stop, round-trip flight from Los Angeles to Honolulu from 12/16-12/20 (week before Christmas): $378
  • Cost the week of Christmas from 12/23-12/27: $378
  • Cost the week of New Year’s from 12/30-1/3: $427

Takeaway: there’s no surge pricing the week of Christmas for travelers heading from Los Angeles to Honolulu as compared to the prior week. That said, those trying to travel for New Year’s will have to pay 13% more than the week of or before Christmas.

Chicago – Los Angeles

  • Cost of a non-stop, round-trip flight from Chicago to Los Angeles from 12/16-12/20 (week before Christmas): $71
  • Cost the week of Christmas from 12/23-12/27: $62
  • Cost the week of New Year’s from 12/30-1/3: $152

Takeaway: those trying to escape a chilly Chicago winter in warmer Los Angeles can do so for nearly $10 cheaper the week of Christmas as compared to the week before. But they will have to pay well over double (145%) the week of New Year’s versus the week of Christmas.

Bottom line to all this: the week of New Year’s is seeing significantly more surge pricing for air travel than Christmas. What we make of that:

  • While families from the New York area tend to frequent Orlando the week of Christmas, it is not nearly as in demand as the week of New Year’s according to the computer algorithms setting ticket prices. You can even still find First Class seats flying on Delta the week of Christmas right now (and that never happens under more normal circumstances). All this despite Disney currently operating, most likely as families take a more cautious approach amid the public health crisis.
  • By contrast, ticket prices for Miami – a popular destination for young singles and couples – pick up very materially from the week of Christmas to the week of New Year’s.
  • Unlike Orlando and Miami, ticket prices from LA to Honolulu and Chicago to LA actually stay the same or fall the week before to the week of Christmas, but jump thereafter during the week of New Year’s. Both locations appeal to families or young singles/couples travel.

The upshot: this airline ticket analysis shows pent-up demand for travel and discretionary spending lies with families and older adults who have most adapted their behaviors this year due to the pandemic. They have been more likely to stay home amid restrictions and social distancing efforts, while young adults and those without kids have continued to travel more at the margin. It will take a wide distribution of the vaccine in 2021 to make families and older adults feel safe enough to travel again, but that will come in time.