Key Points:
- Strong demand for international trips is driving overall travel spending among Americans.
- Lower international airfare prices are supporting this trend.
- Europe remains the top destination, while Asia shows the fastest growth in travel spending.
American households continue to spend more on travel than they did before the pandemic, largely due to a strong interest in international trips, according to new research from Bank of America.
“A key part of travel momentum lies within vacationing abroad,” noted Bank of America Institute economists Taylor Bowley and Joe Wadford in a report on Wednesday.
Although overall travel spending has slightly decreased from 2023 levels, it remains significantly higher than in 2019, with an increase of 10.6% per household, based on Bank of America credit and debit card data from January to mid-August. International travel is particularly strong, they said.
In June, about 17% of Americans expressed plans to travel abroad in the next six months, up from around 14% in 2018 and 2019, according to a survey by the Conference Board.
“I do expect the demand to continue,” said Hayley Berg, lead economist at travel site Hopper.
Lower Airfares Boost International Travel
The demand for international travel has surged over the past two years as concerns about Covid-19 have eased and travel restrictions have been lifted. Americans, eager to explore, have been spending enthusiastically, driven by pent-up desire and saved-up cash.
Falling prices for international airfare have helped underpin this high demand, Berg noted.
“Those lower prices are definitely going to drive some incremental demand for international [travel] more so than what we’ve seen the last couple of years,” she said.
For instance, average round-trip fares to Europe, the most popular destination for U.S. travelers, dropped to about $950 this summer, down from over $1,000 in the previous two years, according to Hopper data. European fares in 2022 were the highest on record in the past decade.
A flight to Rome during the fall shoulder season (September to November) now costs about $600, down from a pandemic-era peak of around $1,300, Berg added.
From May to July, Europe accounted for 43% of American travel spending, while Canada and Mexico combined made up 21%, Bank of America reported. However, Asia is the fastest-growing region, with spending up 11% compared to 2023, while Europe saw a 3% increase. Favorable exchange rates have contributed to Asia’s relative strength.
While international travel spending is robust, the majority of Americans still vacation within the U.S. About 68% of all U.S.-originated trips remain domestic, according to a McKinsey analysis.
That said, “domestic demand has softened slightly, as American travelers return abroad,” McKinsey wrote.
High Earners Continue to Splurge on Travel
Higher-income households, those earning over $125,000 annually, appear to be leading the international travel trend, according to Bank of America economists.
High-end luxury hotels have “outperformed” standard accommodations this summer, suggesting that high earners “are more resilient and continue to splurge on travel,” the report found.
While some cost-conscious travelers are concerned about inflation, many still plan to travel, according to McKinsey. Rather than canceling trips, these travelers are adjusting their plans by booking further in advance or traveling during off-peak times, McKinsey said.
