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Summer travel forecast: Better, but no blowout

Sunday - 5/26/2013, 1:14pm  ET

FILE - In this Tuesday, May 26, 2009 file photo, motel signs are seen in Lake George, N.Y. Airlines, hotels and campgrounds are expecting to see more customers in 2013 than in the previous few summers. (AP Photo/Mike Groll, File)

JONATHAN FAHEY
AP Business Writers

NEW YORK (AP) -- This summer, high rollers are flying to lavish hot spots for their vacations. The rest of us are driving to less luxurious places like nearby campgrounds.

The good news: At some U.S. campgrounds these days you get live bands, air guitar contests and chocolate pudding slip 'n slides.

Americans' plans for summer travel mirror the current state of the economy. Rising home prices and a soaring stock market are encouraging those at the top of the income ladder to take more extravagant trips. But large segments of the population are staying close to home because wages are stagnant, rents are high and the end of the payroll tax holiday has shrunk their take-home pay.

For a travel industry still stinging from the Great Recession, that likely means another summer of steady, but slow, recovery.

AAA, one of the nation's largest leisure travel agencies, isn't expecting a resounding start to vacation season this Memorial Day. Citing the "up and down economy," AAA expects 31.2 million Americans to hit the road this weekend, virtually the same number as last year. Throw in planes, trains and buses, and the number of travelers will drop about 1 percent, AAA says.

As vacationers set out this summer, here's what they can expect:

-- Gas prices about the same as last year. The national average price of gasoline was $3.65 a gallon Friday, 1 cent higher than during last year's Memorial Day weekend. Tom Kloza, chief oil analyst at GasBuddy.com, expects prices to drift lower after the holiday and fall close to last summer's low of $3.33 per gallon before hurricane season starts to drag them up again.

-- More expensive hotel rooms. The average hotel will cost $112.21, before taxes and any other add-on such as resort fees. That's up 4.4 percent from last year's $107.52, according to hotel research firm STR. Hotels are also expected to be slightly fuller, with occupancy rates climbing from 69.3 percent last summer to 70 percent this year.

-- Packed planes, steady airfare. Airlines for America, the industry's lobby group, expects 208.7 million people to fly, up 1 percent from last year. About 87 percent of airplane seats will be filled with paying passengers. Domestic fliers will pay $421 on average for a round trip ticket, down $6 from last summer. International fliers will pay $1,087, up $8, according to the Airlines Reporting Corp.

-- Amtrak expects to meet or exceed the 8.3 million passengers it carried last summer. But the taxpayer-backed railroad wouldn't disclose how fares compare with last summer's average one-way ticket of $66.39.

Mike Klopp, a commercial insurance salesman in Irvine, Calif., is starting to feel better about the economy. He and his wife plan to take their three kids on a vacation up the coast to Monterey in August -- a trip they skipped last year.

But Klopp says local trips are the limit because they're cheaper. Like many others, he's not yet willing to splurge on a dream vacation.

"The kids would love to go to Hawaii, but there's no way I'm going to do that. We've been hunkering down, money is tight right now," he says.

"I'm not sold that things are better," he says.

Other Americans likely agree. Although the unemployment rate has dropped to 7.5 percent, compared with a post-recession high of 10 percent, the Federal Reserve doesn't see it falling below 7.3 percent this year. And economic growth still isn't as strong as it has been after previous recessions. The economy grew at an annual pace of 2.5 percent from January to March. Economists expect the rate to slow to 2 percent from April through June, partly because of the federal budget cuts that started taking effect March 1.

Those with higher incomes never stopped traveling, but thanks to new highs in the stock market they now feel secure enough to take longer vacations.

Patrick Veling, the owner of a California real estate data analysis and consulting business, says he's taking his "most expensive vacation ever" this year. Instead of the normal one-week vacation, he and his wife Susan are taking their two adult kids on a three-week vacation through northern Europe that will include a 12-day cruise. They'll see Denmark, Norway, the Shetland Islands, Ireland and the Netherlands.

"My confidence in the economy and my business is now strong enough that my wife and I have pretty much insisted we make this trip," says Veling.

Others are benefiting from rising home prices and low interest rates. Their homes are finally worth more than they owe on their mortgage, and they are finding it easier to refinance. That leaves them more money to spend.

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