American Households Increase Spending on International Travel as Demand Surges

Recent research from Bank of America indicates that spending on travel among American households has continued to surpass pre-pandemic levels. According to economists Taylor Bowley and Joe Wadford, a key driver of this momentum is the increase in vacationing abroad.

While overall travel spending is slightly lower this year compared to 2023, it remains significantly higher than in 2019, with an increase of 10.6% per household noted from Bank of America credit and debit card data collected from January to mid-August.

In a survey conducted by the Conference Board, approximately 17% of Americans expressed intentions to vacation abroad within the next six months, an increase from roughly 14% in the years 2018 and 2019. Hayley Berg, lead economist at travel site Hopper, believes demand for international travel will continue to grow.

The surge in international travel demand has been attributed to a gradual decline in Covid-19-related health concerns and the lifting of pandemic-era travel restrictions. Americans have been eager to travel, fueled by pent-up demand and available disposable income.

Falling prices for international flights have also played a role in sustaining high demand. Average round-trip fares to Europe, for example, dropped to approximately $950 this summer, down from over $1,000 in the previous two years. This trend marks a departure from the record high fares seen in 2022.

Specifically, airfare to Rome during the fall shoulder season is now around $600, which is significantly lower than the pandemic-era peak of roughly $1,300. During the period from May to July, Europe accounted for the majority, approximately 43%, of Americans’ travel spending.

In contrast, Canada and Mexico combined constituted the second largest share at 21%. Remarkably, Asia has emerged as the fastest-growing region for travel, with spending on the continent increasing by 11% compared to 2023, in contrast to a smaller 3% uptick in Europe.

Despite the robust international travel spending, the majority of Americans still choose to vacation domestically. A report by consulting firm McKinsey reveals that about 68% of trips originating in the United States remain within its borders. However, McKinsey acknowledges that domestic demand has seen a slight decline as Americans resume traveling abroad.

Bank of America economists suggest that the trend in international travel is predominantly driven by higher-income households earning over $125,000 a year. The report also indicates that high-end luxury hotels have outperformed standard offerings, demonstrating that wealthier travelers are more resilient and willing to indulge in travel experiences.

On the other hand, cost-conscious travelers continue to express concerns regarding inflation stemming from the pandemic. Nevertheless, they remain committed to traveling, with many adapting their travel habits by favoring off-peak periods or booking trips further in advance.