Giuseppe Corona, head of listed real assets, alternatives at HSBC Asset Management, examines why travel prices may stay higher for longer as strong demand runs up against tighter capacity across airlines, airports and hotels.
For decades, the steady democratisation of travel has been one of the defining consumer trends of the modern era. Cheaper flights, expanding hotel capacity, and the rise of digital platforms made overseas holidays more accessible than ever.
But today, the post-pandemic rebound in demand is colliding with a very different reality on the supply side—one that could keep prices elevated for longer. While higher jet fuel costs amid recent tensions in the Middle East play a role in the immediate term, the more structural drivers lie in long-term supply constraints across the aviation and hospitality industries, compounded by an increasingly complex geopolitical backdrop.
Aircraft manufacturing bottlenecks
Aircraft supply represents one of the key pressure points. Industry estimates suggest the global commercial aircraft backlog exceeded 17,000 planes in 2024, well above the roughly 13,000 seen on average between 2010 and 2019[1]. Manufacturers continue to face supply chain challenges, from component shortages to labour constraints, which are limiting their ability to ramp up production. This has slowed down production rates and led to elevated input costs that airlines may seek to recover through higher fares.
Capacity constraints at major airports
Infrastructure is another limiting factor. Many major airports remain “slot constrained”, where infrastructure is unable to meet demand for take-off and landing times. Some estimates suggest around 43% of passengers globally depart from congested airports each year, with the figure continuing to grow[2].
These restrictions have led some airlines to increasingly make use of smaller aircraft, which have become more suitable for a wide range of journeys and among the most common aircraft type in the industry[3]. These can deliver higher yields for airlines, particularly when serving point-to-point destinations that do not rely on lower-margin transfer passengers. For travellers, the implication is fewer seats on key routes—particularly long-haul journeys such as Europe to the Americas—helping to keep fares elevated.
Geopolitical complexity adds cost
Geopolitics is adding a further layer of pressure, with conflicts in Eastern Europe and the Middle East reshaping global aviation routes. On some Europe-North Asia routes, flights paths have historically passed over Russian airspace; where that isn’t possible rerouting can add up to three additional hours of flying time. Simultaneously, periodic airspace restrictions in parts of the Middle East and other constraints – including restrictions affecting some Indian carriers’ routings via Pakistan – are reducing routing flexibility.
These disruptions have tangible operational consequences. Longer flight times increase fuel consumption and, in some cases, require additional aircraft to maintain schedules, burdening airlines with additional costs which can contribute to higher ticket prices.
A tighter hotel market
The hospitality sector is facing similar constraints. The pipeline for new hotel construction remains modest following a period of subdued construction. In the five years to 2020, hotel room supply in key leisure markets grew by around 2–3% annually, a rate that appears to have slowed materially since 2020[4].
Meanwhile, the expansion of alternative accommodation platforms such as Airbnb, which previously helped create additional supply, appears to be slowing. Across Europe’s most popular destinations—Spain, Italy, France, Greece, and Portugal—incremental growth in short-term rental supply has slowed sharply and, in some markets, has been close to flat.
Rising operating costs
Hotels are also grappling with rising operating costs. Higher inflation across much of the global economy has led to costs like consumables and energy becoming more expensive, creating upward pressure on room rates. In the UK specifically, changes to National Insurance contributions and the minimum wage are also placing additional pressure on the industry.
While hotel chains have sought to adapt and amend business models and product offerings to mitigate cost pressures, with higher prices, guests often have an expectation of better service, which constrains the ability of hotel operators to reduce costs too aggressively.
Prices may remain higher for longer
For much of the past 50 years, travel costs have declined as competition, innovation, and globalisation expanded access. That dynamic is now shifting. While aviation and hospitality remain competitive and a return to modest price deflation cannot be ruled out, the structural adjustments of recent years suggest the era of ever-cheaper holidays may be fading.
For consumers, travel remains accessible, but it requires a more considered approach. Booking early, staying flexible on dates, and considering new destinations are becoming increasingly important.
In a world of tighter supply and heightened geopolitical risk, the cost of seeing the world may no longer fall as easily as it once did.
[1] https://www.oliverwyman.com/our-expertise/insights/2025/oct/how-to-revive-aircraft-supply-chains-to-accelerate-delivery.html
[2] https://www.iata.org/en/iata-repository/pressroom/fact-sheets/fact-sheet-airport-slots/
[3] https://www.iata.org/en/iata-repository/publications/economic-reports/the-dominance-of-narrowbody-jets-in-airline-operations/
[4] HSBC estimates based on company data, Bloomberg, December 2025
