Demand for international travel drives travel momentum and spending

According to a brand new study from Bank of America, travel spending by American households continues to exceed pre-pandemic levels – a trend underpinned by enthusiasm for international travel.

“A significant part of the travel dynamic lies in vacations abroad,” wrote Taylor Bowley and Joe Wadford, economists on the Bank of America Institute, in a note Wednesday.

Overall, travel spending declined barely in comparison with 2023, but was still “much higher” than in 2019 – a rise of 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 “an area of ​​continued strength,” Bowley and Wadford said.

According to a recent Conference Board survey, about 17% of Americans said in June that they plan to vacation abroad in the subsequent six months, up from nearly 14% in 2018 and 2019.

“I expect demand to continue,” said Hayley Berg, chief economist at travel website Hopper.

Demand for international travel has skyrocketed over the past two years as health fears related to Covid-19 subsided and countries began to lift travel restrictions resulting from the pandemic.

With their pent-up desire to travel and their money reserves, Americans spent money eagerly.

Falling prices for international flights have contributed to the high demand this yr, Berg said.

“These lower prices will definitely create some additional demand for international [travel] more than what we have seen in recent years,” she said.

For example, average round-trip airfares to Europe – generally the most popular international destination for U.S. tourists – fell to about $950 this summer, down from over $1,000 in the previous two years, Berg said.

According to Hopper's ten-year data, European airfares in 2022 were the highest ever recorded.

A flight to Rome currently costs about $600 during the fall off-season, compared to the pandemic-era peak of about $1,300, Berg said.

(The fall shoulder season is the time of year between the summer high season and the winter shoulder season, usually September through November.)

The majority of Americans' spending between May and July was in Europe (43 percent), according to Bank of America. Canada and Mexico combined came in second with 21 percent.

The fastest-growing region, however, is Asia: spending on the continent rose 11 percent compared to 2023, compared to 3 percent in Europe, Bank of America said. Favorable exchange rates contributed to this relative strength, it said.

While spending on international travel remains high, most Americans still spend their holidays domestically: About 68% of all trips that originate in the United States take place within the borders of the United States, according to a current analysis from the management consultancy McKinsey.

However, “domestic demand has declined slightly as American travelers return abroad,” McKinsey wrote.

According to economists at Bank of America, it appears that higher-income households – those earning more than $125,000 a year – are driving the trend toward international travel.

Top-class luxury hotels have “outperformed” standard offerings this summer, suggesting that high earners “are more resilient and proceed to spend money on travel,” the Bank of America report said.

Although travelers, wary of costs, appear concerned in regards to the pandemic-related rise in inflation, most of them plan to proceed traveling, in response to McKinsey.

“Instead of canceling their trips, these consumers are adjusting their behavior by traveling outside of peak travel periods or booking trips further in advance,” McKinsey wrote.