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Memorial Day, summer travel prices are still 'very shocking': Priceline CEO

Priceline CEO Brett Keller joins Yahoo Finance Live to discuss rental car rates, airfares, and hotel prices as the busy summer travel season kicks off during Memorial Day weekend.

Video transcript

JULIE HYMAN: Memorial Day weekend kicks off the unofficial start of summer. Even with inflation remaining elevated, your annual vacation may actually cost less this year. According to Priceline, data shows rental car rates and airfare prices have dropped this summer, while hotels remain flat compared to 2022. This as Memorial Day weekend travel is expected to surge to prepandemic highs.

Brett Keller is the CEO of Priceline, and he's joining us now to dive into the state of summer travel. Thanks for being here. It's surprising that things are coming down because I think people feel like everything is going up right now. And so I wonder how that sort of psychological effect is also going to be affecting travel demand, Brett.

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BRETT KELLER: Sure. Well, we've seen prices come up very quickly over the last year, especially, and even through first quarter, I think for the first time, we're starting to see prices eased just a little bit, especially for domestic travel and over the Memorial Day holiday.

But, you know, as you try to book into those very high demand days, you're seeing prices that are still very shocking and really can hurt the budget, especially if you're trying to travel overseas, which many consumers are now trying to do. Prices to Europe and especially prices to Asia are still up materially from where they were just a year ago.

- So, Brett, I got to ask you, so AAA forecasting a decline as we've talked about in travel this year in air travel. So down from last year, we saw just over 3 million and down or actually, no, I'm sorry, that is a correction. They are expecting an increase in air travel this year. And that comes-- that kind of flies in the face of what we've seen in terms of inflation. What are-- what is the data showing you in terms of air travel this year?

BRETT KELLER: Sure, Well, we've had millions of consumers book trip so far this year on the Priceline experience. And what we're seeing is consistent with what AAA has shown. We're seeing that price points for airlines have been up year to date and are starting to come down a little bit. But traffic levels are significantly higher than they were a year ago.

We'll probably see somewhere in the neighborhood of 10% more travelers moving through US airports over the next three or four days than they were a year ago and that has been a very healthy, you know, experience for the travel industry. But consumers seem to be pushing right through the higher prices. And they want to travel and they continue to travel

JULIE HYMAN: Brett, what are they spending less on, right, is it something in the travel stack or are they just not buying as much stuff on the other parts of their budget or are you seeing any places within travel, where people are driving instead of flying, booking a cheaper hotel, et cetera, et cetera?

BRETT KELLER: But we haven't seen as much trading down yet. And that's possibly something we could see later in the year as finances really get tight for consumers. Clearly, with gas prices down considerably where they were just a year ago. $5 a gallon last year, now we're closer to $3.60 a gallon. That really is pushing more people out onto the roads and driving. And so the drive and stay market is going to be quite high this year.

When people are really looking to save money though, obviously, they're doing some things with how they plan and book their travel. So, for example, just changing your date by a day or two in terms of when you fly can reduce the cost of a ticket by a couple hundred dollars. And so that's why we built tools on Priceline to help consumers really find the dates that are most attractive in terms of price points. That's one.

Consumers will also shift destinations, right? Traveling to a destination like an Orlando or a Las Vegas. You can always really find flights into those markets because of the size and scale of the market that are more affordable than if you're trying to go to a destination like a Miami. And so consumers will shift destinations to really help fit their budget in terms of what they're trying to spend.

JULIE HYMAN: Brett, I also want to ask you, a friend of the show, Liz Ann Sonders, who's an equity strategist recently posted a chart looking at an increase in delays for the airlines that we've seen an uptick in cancellations and delays. How is that affecting people's flight plans or maybe they're choosing different airlines or how is that sort of feeding through?

BRETT KELLER: Well, last year that came to a real head, if you recall, when a cancelled-- was really reaching all time highs and the airlines have largely got that under control now. In fact, they've built a lot more slack into their system.

In fact, that's put pressure on prices because while the capacity may be the same as it was last year or even slightly higher in terms of number of planes and seats, they reduced the slack in order to-- I'm sorry, they've increased the slack in order to reduce some of those issues as we move through very busy periods like this, you know, Memorial Day holiday.

So overall, the airlines have been doing a pretty good job with that. And weather for the weekend looks pretty good in most parts of the country, that will also help to have a smoother experience for consumers. So largely, we haven't seen that as a material concern that it prevented consumers from booking flights.

- And, Brett, one more question before we lose you, where are people going, especially for this unofficial kickoff of summer, big travel weekend we have right in front of us? So where are people going? Is this domestic international? Is it a 50/50 split? What are you seeing?

BRETT KELLER: Well, let's start with international. Consumers have really picked up their searches to international destinations over the last couple of months. In fact, we looked at searches to destinations in top cities in Europe. So the big ones-- London, Paris, Rome, Amsterdam, very hot destinations right now.

And consumers are now beginning to go to Asia, so Japan, the Philippines, Thailand, very hot destinations as well, despite the expense that it requires now to fly to those destinations. Here in the US, consumers are going to the big ones. They're going to Orlando and Las Vegas for entertainment and they go to the big cities again, so Chicago is a top booksy on our platform as is Atlanta, New York, some of those destinations over on the West Coast. So consumers are out and moving this holiday.

- All right, so we should be prepared for more tourists this weekend in New York. All right. Our thanks to you Brett Keller, Priceline CEO.