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According to a new survey from Bank of America, US household travel spending continues to exceed pre-pandemic levels, a trend buoyed by enthusiasm for international travel.
“The key to travel momentum is international travel,” Bank of America Research Institute economists Taylor Bowley and Joe Wadford wrote in a note Wednesday.
Overall, travel spending is slightly down from 2023, but remains “much higher” than 2019, up 10.6% per household, he said, citing Bank of America credit and debit card data from January through mid-August.
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Bowley and Wadford said international travel “remains one of the areas of strength”.
About 17% of Americans said in June they planned to travel internationally in the next six months, up from about 14% in 2018 and 2019, according to a recent Conference Board survey.
“We expect demand to continue,” said Haley Berg, chief economist at travel site Hopper.
Falling airfares are supporting demand for international travel
Demand for international travel has surged over the past two years as coronavirus-related health fears have subsided and countries have begun to ease pandemic-era travel restrictions.
Americans, fueled by pent-up travel desire and cash reserves, eagerly spent.
Berg said falling international airfares have helped support high demand this year.
“Lower prices will undoubtedly lead to increased demand for international air travel. [travel] “Even more so than what we’ve seen in the past few years,” she said.
For example, the average round-trip fare to Europe, the most popular international destination for U.S. tourists, has fallen to about $950 this summer from more than $1,000 the past two years, Berg said.
Hopper data going back a decade shows European freight rates for 2022 are the highest on record.
For example, a flight to Rome during the fall off-season now costs about $600, down from a pandemic-era peak of about $1,300, Berg said.
(The fall shoulder season is the time between the summer high season and the winter low season, usually from September to November.)
According to Bank of America, Europe accounted for the majority of Americans’ spending between May and July, at 43%, with Canada and Mexico coming in second at 21%.
But the fastest-growing region is Asia: Spending on the continent is up 11% over 2023, compared with 3% in Europe, according to Bank of America. Favorable foreign exchange rates also contributed to the relative strength, the company said.
While spending on international travel remains strong, most Americans still vacation domestically: About 68% of trips originating in the U.S. remain within the country, according to a recent analysis by consulting firm McKinsey.
Still, “domestic demand weakened slightly as American travelers returned to overseas markets,” McKinsey wrote.
High-income earners “spend money on travel”
Economists at Bank of America say the trend towards international travel appears to be driven by high-income households making more than $125,000 a year.
The Bank of America report said luxury hotels “outperformed” standard hotels this summer, suggesting higher-income earners are “more resilient and continue to splurge on travel.”
McKinsey said that “budget-constrained” travelers are worried about a pandemic-era spike in inflation, but most plan to keep traveling.
“Instead of canceling trips, these consumers are changing their behavior by traveling during off-peak periods or booking trips earlier,” McKinsey wrote.
