Travel spending among American households continues to surpass pre-pandemic levels, fueled by a strong desire for international trips, as per new research from Bank of America.
In a note published on Wednesday, economists Taylor Bowley and Joe Wadford from the Bank of America Institute highlighted the importance of vacationing abroad in driving the current travel momentum. Despite a slight decrease in overall travel spending compared to 2023, 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.
One of the key drivers of this trend is the robust demand for international travel, with about 17% of Americans expressing their intention to vacation abroad in the next six months, up from around 14% in 2018 and 2019 according to a recent Conference Board survey. Hayley Berg, lead economist at travel site Hopper, expects this demand to continue to grow.
Lower airfares have played a crucial role in supporting the demand for international travel. With Covid-19-related health concerns decreasing and countries lifting travel restrictions, Americans have been eager to spend on international trips, aided by lower prices for airfare. Berg noted that these reduced airfares are likely to drive even more demand for international travel compared to previous years.
For instance, average round-trip fares to Europe, a popular destination for U.S. tourists, dropped to around $950 this summer from over $1,000 in previous years. Europe saw record-high fares in 2022 but has since become more affordable, with a flight to Rome during the fall shoulder season now costing around $600, down from a peak of $1,300 during the pandemic.
While Europe remains the top destination for American travelers, spending in Asia has seen the highest growth, with a significant 11% increase compared to 2023. Exchange rates have contributed to this growth, according to Bank of America. Despite the rise in international travel spending, most Americans still prefer domestic vacations, with 68% of trips starting within the U.S.
Higher-income households, earning over $125,000 a year, are leading the trend in international travel spending, with luxury hotels outperforming standard accommodations. These high earners are more resilient and continue to splurge on travel, as indicated by the Bank of America report. Although some cost-conscious travelers are concerned about inflation, McKinsey’s analysis shows that most are adapting by traveling during off-peak periods or booking further in advance to continue their travel plans.
In conclusion, the appetite for international travel among American households remains strong, driven by lower airfares, pent-up wanderlust, and a willingness to splurge on luxury experiences. As travel restrictions ease and confidence grows, the trend towards international vacations is expected to continue to rise.
