You can still travel on a budget during inflation. Here’s how

U.S. inflation is not as bad — or as chronic — as Argentina’s. And prices for many travel expenses have actually begun falling. Airfare prices dropped 9% month-over-month, according to September Consumer Price Index data. Yet it could be some time before prices for anything, including airfare, hotels and rental cars, regain any semblance of stability.

Two-thirds of Americans cited “cost” as the most important factor affecting fall trip planning, according to a recent Tripadvisor survey. Yet, despite inflation, half of respondents plan to travel more this season than they did during the same period in the previous year. So travelers aren’t delaying or canceling their plans so much as trying to keep them within budget.

What should us budget-conscious travelers do? Throw up our hands and party like Argentines?

It’s easy to talk about “travel inflation” like it’s some monolithic force, but it’s just the law of supply and demand playing out like it always does. And it hasn’t been affecting every aspect of travel the same way.

At first glance, you might think the dark blue line in the chart above represents the hubbub around airfare this summer. But that line represents the cost of renting a car, which has become somewhat less expensive in the last few months, yet remains 46% higher than pre-pandemic rates.

Hotels and airfare, while more expensive than they were throughout much of the pandemic, have nearly come back to baseline. And “food away from home” (e.g., restaurant food) has steadily and sneakily crept up to 17% above pre-pandemic prices, according to September CPI data.

What does this mean for travel budgeting? Your intuitive sense of how much it will cost to rent a car in Hawaii — or order a steaming plate of loco moco — are probably wrong. And your worst-case expectations for the price of airfare and hotels are probably overblown.

It also means that it will be easier to trim budgets by reducing plans that depend on rental cars or eating out. Booking a hotel room with a kitchen might not be cost-effective under normal circumstances, but it could be this year. And visiting a destination with good public transportation, like a European city, will avoid those eye-watering rental car prices.

Trying to figure out whether now is a good time to book travel to avoid future price hikes is like trying to figure out whether it’s a good time to buy stocks. The truth is that nobody knows. Yet travel bookings differ from investments in one crucial way: They can often be canceled or rebooked if prices drop.

Flexible travel bookings can help you travel more cheaply. For example, let’s say you’re planning a trip later this fall and are pondering whether to book a hotel now or wait to see if prices drop. The reality is that you can do both: Book a flexible room rate now, lock in the price, then cancel and/or rebook if prices drop.

It’s a tails-you-win, heads-you-win situation. If prices go up, you’ll have snagged a lower rate. If prices go down, you can modify your booking and save. The same logic applies to rental cars and air travel, assuming the bookings are flexible.

Watch out for “flexible” bookings that carry restrictions or other limitations. And don’t go wild booking every flight and expecting to cancel them later for your money back. Airfare refunds are often issued as vouchers or travel credit, not cash.

My colleague and I just crunched hundreds of data points comparing the cost of travel using points and miles versus cash and found something surprising: The per-point value for most travel rewards programs actually went up in 2022. Meaning points and miles are actually deflating while cash prices inflate.

(More accurately, cash prices have gone up while point and mile prices have remained less affected, which has had the mathematical effect of driving up the relative value of points and miles.)

The point is, it’s a good time to use points and miles, especially those of programs that still use an award chart. Award charts keep the price of points relatively stable, and differ from programs that use dynamically priced awards that are tied to the cash value of a given redemption.

Hyatt hotels, for example, offers a screaming 2.8 cents-per-point value in our 2022 valuations, up from 1.9 cents per point in 2021. This jump in value is largely due to its award chart. Marriott, meanwhile — which eliminated its award chart earlier this year — hangs steady at 0.7 cents per point year-over-year.

In terms of budgeting, it’s always a good idea to compare the value of points to the cost in dollars. But in general, as long as cash prices are high, consider using rewards.

Will travel prices keep dropping? Will car rentals ever be affordable again? Honestly, we don’t know. And unless you’re the type who budgets their travel down to every last cent, you don’t need to try to optimize every last travel expense.

Inflation may be on an upward trajectory, and though travel prices may be up across the board, that doesn’t mean you should blow your savings on a vacation to the Maldives. Your dollars aren’t about to be as worthless as toilet paper. We’re not at the Argentine YOLO stage … yet.