Rising Gasoline Prices and the Summer Travel Equation

Here we are again finding ourselves, as we move closer to the summer travel season, beginning to see a familiar unwanted pattern re-emerge, one that our industry has dealt with before and one that should not be underestimated as we get closer to the opening season. The rising cost of gasoline is quietly and steadily working its way back into the decision-making process of the American traveler.  And make no mistake, it matters and can have immediate impact on people’s planning.

According to Patrick De Haan, head of petroleum analysis at GasBuddy, there is now a strong likelihood (he places it at roughly 80%) that gasoline could approach or exceed $5 per gallon in the near term.  In fact, it’s already there in some states, such as California. De Haan also points out how quickly this can happen, with spikes of 10 to 35 cents per gallon occurring in very short order.  A few stations in Los Angeles are currently charging $9.00 per gallon! De Haan says this creates “sticker shock” at the station signage to the passing drivers, impacting their urge to travel.

Many of us remember in 2007 that when gasoline first crossed the $4.00 per gallon threshold, it created an immediate and measurable reaction.  Travel, particularly discretionary travel, slowed. Regional theme parks, such as Kings Island, who is dependent on the drive market, felt it and felt it fast. I remember they lost 250,000 people from mid-June to mid-July. Every time gasoline ratcheted up 25 cents per gallon, there was a pause in travel and attendance, as if the travelers had been hit in the head with a ball bat! Not a total travel collapse, but a huge hesitation ensued. Families began to rethink travel frequency, shortened stays, or a delayed plan altogether. That incremental hesitation added up to real attendance pressure. I should point out, however, when gasoline prices started to rescind around July 17th of 2007, people did “BUST OUT” and returned quickly to the parks. Kings Island recovered about 200 thousand of their loss in a short two-week period, management told me, recapturing it all back within a month. The current question now is, are we now staring at a similar scenario?

What is driving this issue now is not just normal seasonal movement. We see all day long on the news that there are much rougher forces at play.  The geopolitical tensions in the Middle East are putting pressure on crude oil supply lines. The Strait of Hormuz remains a critical chokepoint, and any instability there reverberates globally. Add to that refinery maintenance issues, the shift to more expensive summer fuel blends, and the potential for hurricane-related disruptions along the Gulf Coast, and you have the makings of sustained upward pressure heading directly into peak vacation season.

However, as of today, and this is important, there is a potential release valve. The possibility of a one-month ceasefire in current conflict zones announced currently could have an immediate psychological and economic impact on oil markets. We have learned through the years that oil is as much about perception as it is about supply. A possible, even temporary, easing of tensions can bring crude prices down rather quickly. We have seen this today, where oil reached $102 per barrel, with a low around $92.00 per barrel. These swings can quickly filter through to gasoline prices at the pump. It may not solve the problem long-term, but it could provide a much-needed window of relief as the summer travel season begins to ramp up. Quite frankly, it is too early to tell if the proposed diplomacy is real or just talk, but it did have an impact on the oil market immediately upon being put out there today.

That said, the industry cannot plan on that happening. It’s way too early in this turbulent situation.

I also want to point out an additional planning effect that often gets attention and is equally important, and that is air travel. Rising oil prices directly impact jet fuel costs, and airlines historically respond quickly (we have seen this occur this week).  We saw this clearly in 2008 and again in 2022. Fares increase, capacity tightens, and suddenly the cost of flying becomes another barrier factored into the public’s planning. When both driving and flying become more expensive at the same time, the consumer is squeezed from both sides, and so are the leisure centers. When that happens, travel behaviors rapidly change.

This does not mean travel totally stops. It rarely does. But it does mean there are modifications.  Shorter trips.  Closer-to-home destinations.  In fact, 2007 was when the term “Staycation” was coined. We saw fewer add-on trips planned, and in some cases, destination plans postponed.  For regional parks, this can be positive if they are out in front of it early enough. The regional parks may benefit from guests staying closer to home.

In my opinion, this is not yet a crisis situation for the travel and theme park industry. But it is clearly a “Pressure Point”.  The demand for leisure travel is still here, and at this early juncture in the upcoming season, families still want their summer experience. But we as an industry must be aware that people are watching their total spend more closely than they have in recent years due to many months of ongoing economic concern.  Gasoline, which has not been an issue for 3-4 years, has re-entered the planning equation in a consequential way. It is always a serious factor when we see the gas prices rise. However, if prices remain manageable, hovering below the $4 threshold, the industry will push through. But if prices rise above the threshold, and stay there into the heart of the season, history tells us exactly what happens next. The Ball Bats come out.  People don’t want to stop traveling, they just start thinking a lot harder before they do.

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