① Surge in Costs for Overseas Travel
Demand for overseas travel has surged following the transition to the endemic phase. The demand has increased so much that people have been saying they would starve to travel abroad. Compared to the pre-COVID-19 era, people now require a much larger sum to embark on an overseas trip.
The cost of overseas travel has seen its most significant increase in over 13 years.{vi17} The Korean Statistical Information Service reported last month that the consumer price index for overseas group travel was 118.49, a 15.9% increase from last year. This is the highest level in 13 years and one month, following a 17.6% increase in September 2010.
The consumer price index for overseas group travel declined throughout 2020, which was the initial stage of the COVID-19 pandemic. However, the increase has been gaining momentum with the resumption of overseas travel. The inflation rate for overseas group travel expenses increased from 5.7% in August to 12.6% in September, surpassing 15% last month.
The main factor behind the increase in overseas travel costs is inflation. After the COVID-19 pandemic, there has been a rapid rise in prices worldwide. The recent surge in inflation is directly due to disruptions in the supply of raw materials and parts caused by the COVID-19 pandemic.
In 2022, raw materials prices such as grains, petroleum, and iron ore have generally increased. Amid this, the outbreak of the Russia-Ukraine war has caused raw material prices to skyrocket. Due to inflation, costs such as labor for charter bus drivers, accommodation, and meals have generally increased abroad.
A travel agency representative stated, “Prices in North America and Western Europe have risen significantly. Sometimes, finding a charter bus driver locally is not easy; in such cases, people can set the cost itself high.
② Airfare Prices Are Not Cheap
There is a shortage of air supply due to demand as air routes have not fully recovered. It’s not easy to book low-cost airline tickets as before the COVID-19 pandemic. Even for the same route, there is a significant price difference compared to the past. The price of air tickets has increased due to the rise in fuel surcharges caused by the strong international oil price.
The International Airfare Price Index has risen for three months since it recorded 116.67 last May. As international oil prices rise and travel demand increases, it will continue. Jet fuel is produced based on kerosene. As of September, the international kerosene price was $123.09 per barrel, breaking the $120 mark for the first time in 10 months since last November.
International fuel surcharges are divided into 33 stages and apply when the average price of Singapore jet fuel per gallon exceeds 150 cents. As global oil prices are strong, the application stage has risen to the 14th stage.
Korean Air’s international fuel surcharge for the 6500-9999 mile range is 226,800 KRW ($190) one-way. This is an increase of 63,000 KRW ($53) from September when the 11th stage was applied. Asiana Airlines also set the fuel surcharge for the over 5000-mile range at 177,100 KRW ($148), an increase of 42,500 KRW ($36) from the previous month.
The increase in travel demand leading to higher base fares is the biggest reason for the rise. Airlines cap base fares and apply a discount policy to sell air tickets. The higher the reservation rate, the more expensive the air ticket. The international surcharge varies by tens of thousands of won depending on the airline, while the domestic line is almost the same.
③ Package Tours Now in the Premium Era
Regarding package tours, shopping was always included as an essential addition. While the cost was affordable as many people participated, there were many cases where you had to visit shopping places several times. Dissatisfaction was high due to forced options and shopping.
After COVID-19, small-group overseas travel without shopping places for premium products is gaining popularity rather than cheap costs. A travel agency representative explained, “The proportion of premium products in the total number of reservations from January to October this year was 13.24%, and the number of reservations for premium products increased by 472% compared to the same period last year.” Premium products are clearly popular in the package tour market, where low-price competition is rampant.
Premium products are high-revenue products per person. Travel agencies are differentiating themselves by promoting premium brands. This is analyzed as revenge travel psychology. People hope to upgrade not only air tickets but also hotels and meals.
According to the “Domestic and Overseas Travel Trends” report announced by the consumer research agency Consumer Insight, based on a survey of 2000 adults aged 19 and over, the total expenses of overseas travelers as of April this year averaged 1,951,000 KRW ($1,636).
By. Han Mia
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