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Travel spending among American households continues to outpace its pre-pandemic levels, a trend underpinned by a zeal for international trips, according to new Bank of America research.
“A key part of travel momentum lies within vacationing abroad,” Taylor Bowley and Joe Wadford, economists at the Bank of America Institute, wrote in a note Wednesday.
Overall, travel spending is down slightly from 2023, yet it remains “much higher” than 2019 — up by 10.6% per household, they wrote, citing Bank of America credit and debit card data from January to mid-August.
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International travel is “one area of continued strength,” Bowley and Wadford said.
About 17% of Americans said in June that they intended to vacation abroad during the next six months, up from roughly 14% in 2018 and 2019, according to a recent Conference Board survey.
“I do expect the demand to continue,” said Hayley Berg, lead economist at travel site Hopper.
Lower airfares underpin international travel demand
Demand for international travel surged over the past two years as Covid-19-related health fears waned and countries began dropping their pandemic-era travel restrictions.
Americans spent zealously amid pent-up wanderlust and a stockpile of cash.
Falling prices for international airfare have helped underpin high demand this year, Berg said.
“Those lower prices are definitely going to drive some incremental demand for international [travel] more so than what we’ve see the last couple years,” she said.
For example, average round-trip fares to Europe — generally the most popular international destination for U.S. tourists — declined to roughly $950 this summer, down from more than $1,000 the prior two years, Berg said.
European fares in 2022 were the highest on record, according to Hopper data, which goes back a decade.
A flight to Rome during the fall shoulder season is now about $600, down from a pandemic-era peak of roughly $1,300, for example, Berg said.
(The fall shoulder season is the time of year between the summer high season and the winter low season, usually from September to November.)
Europe accounted for the bulk of Americans’ spending from May to July, at 43%, according to Bank of America. Canada and Mexico combined held the No. 2 spot, at 21% of spending.
However, Asia has been the fastest-growing region: Spending on the continent jumped 11% relative to 2023, compared to 3% in Europe, Bank of America said. Advantageous exchange rates played into that relative strength, it said.
While international travel spending remains robust, most Americans are still vacationing domestically: About 68% of all trips that start in the U.S. remain within its borders, according to a recent analysis by the consulting firm McKinsey.
That said, “domestic demand has softened slightly, as American travelers return abroad,” McKinsey wrote.
High earners ‘splurge on travel’
Higher-income households — those earning more than $125,000 a year — seem to be driving the international-travel trend, according to Bank of America economists.
High-end luxury hotels have “outperformed” standard offerings this summer, suggesting high earners “are more resilient and continue to splurge on travel,” the Bank of America report said.
While “cost-constrained” travelers seem to be worried by a pandemic-era spike in inflation, most plan to continue traveling, McKinsey said.
“Instead of canceling their trips, these consumers are adapting their behavior by traveling during off-peak periods or booking travel further in advance,” McKinsey wrote.
