analysis

By Ed Hewitt

updated 1:47 p.m. ET June 4, 2008

Save for perhaps a new house or car, few one-shot expenses cost more than a big annual vacation. By the time you add up airfare, hotel, rental cars, restaurant meals and admission to attractions, it's rare that you'll spend less than four figures per person on a vacation of five days or more.

So as goes the economy, so goes the travel industry — and this summer could be a tough one for travelers and industry insiders alike. Gasoline costs in particular could drive folks to decide, well, not to drive, and energy costs in general will keep expenses high across the travel industry, from airlines to roadside food stands. As a result, the tourism industry is facing its bleakest forecasts since the oil crisis of the 1970s. Here's a look at how it could shape your summer vacation plans.

Fuel prices drive everything else
As was the case three decades ago, fuel prices are all over the news, but only recently have most folks really started feeling the squeeze of truly high prices at the pump. In just the past week or so, many potential summer travelers have experienced only their second or third uber-expensive trip to the gas station. For example, I was treated to my first $80 gasoline outlay last week, and I trembled in my seat when I saw the final tally. You can bet I will be driving less.

For many, summer trips are still in the planning stages. I believe this will have a prohibitive effect on the travel plans of many summer revelers.

All that money that is going to oil barons and oil companies has to come from someone's pocket. This summer, it is going to be regular commuters, travelers and travel providers who empty out the till.

What's next? Trends to watch
I see this falling in out in the following ways:

1. Car travel will decrease dramatically. There's no question that gasoline will now become a budget item for most travelers. Even at $2, travelers mostly took for granted the cost of fuel when doing budgets, but at $4 it will be a completely different story. Squinting hard to see the bright side, you could predict that the recurring weekend crush of traffic could be a little more manageable. Meager solace, I know.

2. Short trips will become the coin of the realm. If you see this likely outcome as a reason to look for interesting destinations closer to home, rather than as a buzzkill, you might be pleasantly surprised; see more on this approach in "Tips for Summer 2008" below.

3. It might turn out to be cheaper to fly some moderate distances. For example, roundtrip from my town to Boston is 525 miles. At 20 miles per gallon, that's 26 gallons of gas, and at $4 a gallon, that's a little over $100 roundtrip. Add in tolls, and it's probably more like $140, not including wear on your car. I've seen some $160 roundtrip flights on the same route. There is still the ride to the airport to consider, as well as airport parking, but avoiding 8 or 10 hours in summer traffic might be worth the few bucks in the end.

4. As cost is going to be a primary concern for a large number of travelers, all-inclusive vacations will enjoy increased popularity, as they offer the closest thing possible to a fixed-price trip. Resorts could do particularly well because they offer extensive opportunities for diversion on the grounds without extra admission, fuel, parking or car rental fees. Booking a resort stay can be a reliable way to avoid unexpected costs and stick to a budget.

A more modest version of an all-inclusive vacation, air/hotel/car package deals are looking pretty attractive right about now, particularly for vacationers headed to very popular destinations where other costs can add up very quickly.

5. Europe may not seem so expensive after all. In recent weeks, there were a few price wars underway for transatlantic flights, so getting to Europe was a bit less expensive (if decidedly not “cheap” in most folks’ books).

Once you get there, gas prices may be high, but an extensive and efficient public transportation system means that you probably won't have to do much driving. As it gets more expensive to stay home, doing a budget for an overseas trip might be worth your time. If you are considering a trip to Europe this summer, check out our Top 25 Ways to Save on Europe Travel.

Hotels, restaurants and attractions
So if we have less money to spend, what happens to the travel and tourism industry?

• Hotels will have fewer lodgers
• Restaurants will have fewer diners
• Attractions will have smaller crowds

The laws of supply and demand should dictate a decline in price, but exactly how this will play out still remains to be seen, for the simple reason that costs are up for everyone. Hotels will pay higher energy costs, as will restaurants, who will also be hit by surging food prices — so establishments working on narrow margins may not be able to offer big discounts this season. In the end we will probably pay more, proprietors will probably make less, and no one will really be happy about it.

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