Travel spending among American households has continued to surpass its pre-pandemic levels, according to recent research conducted by Bank of America. The trend is largely fueled by a growing interest in international travel, as highlighted by economists Taylor Bowley and Joe Wadford from the Bank of America Institute. While overall travel spending has seen a slight decrease from 2023, it remains significantly higher compared to 2019, showing a 10.6% increase per household based on Bank of America credit and debit card data from January to mid-August.
A significant portion of the travel momentum can be attributed to the preference for vacationing abroad, as highlighted by Bowley and Wadford. The demand for international travel has seen a surge, with approximately 17% of Americans expressing their intention to vacation abroad within the next six months. This figure has seen an increase from around 14% in 2018 and 2019, based on a recent survey by the Conference Board.
The increased demand for international travel can be attributed to several factors. With the decline in Covid-19-related health concerns and the relaxation of pandemic-era travel restrictions by various countries, Americans have been eager to satisfy their wanderlust. Additionally, the availability of a surplus of cash and falling prices for international airfare have played a significant role in driving up the demand for international travel.
Lower airfares have been a major contributing factor to the surge in international travel. Average round-trip fares to popular destinations like Europe have seen a decrease, with fares dropping to around $950 this summer from over $1,000 in previous years. This decline in airfare prices has made international travel more accessible and attractive to American tourists. In particular, European fares reached record highs in 2022 but have now become more affordable, making destinations like Rome more accessible to travelers.
Bank of America’s data reveals that Europe remains the top destination for American travelers, accounting for 43% of spending from May to July. Canada and Mexico combined hold the second spot, representing 21% of total spending. However, Asia has emerged as the fastest-growing region, with spending increasing by 11% compared to 3% in Europe. The advantageous exchange rates in Asia have contributed to the region’s relative strength in attracting American tourists.
While international travel spending remains strong, the majority of Americans still choose to vacation domestically, with around 68% of trips starting within the U.S. McKinsey’s analysis suggests that domestic demand has slightly softened as more Americans are returning to international travel. Higher-income households, earning over $125,000 annually, are seen as the primary drivers of the international travel trend, according to Bank of America economists.
Despite concerns about inflation impacting travel costs, most cost-constrained travelers are not canceling their trips but rather adjusting their travel behavior. Many are opting to travel during off-peak periods or booking their trips further in advance to mitigate the impact of rising prices. McKinsey’s report indicates that the resilience of high earners and their willingness to splurge on luxury travel experiences has contributed to the continued growth in international travel spending.
The data reflects a positive trend in travel spending among American households, with a noticeable preference for international trips. Despite challenges such as inflation and changing consumer behavior, the allure of travel remains strong, especially among higher-income earners. As travel restrictions continue to ease and airfare prices remain competitive, the outlook for international travel appears promising in the coming months.