American demand for international trips is boosting travel spending! Find out why this is happening!
Travel spending among American households continues to exceed pre-pandemic levels, largely driven by a strong demand in international trips, according to new research from Bank of America. “A key part of travel momentum lies within vacationing abroad”, noted Taylor Bowley and Joe Wadford, economists at the Bank of America Institute, in the recent report.
While overall travel spending has slightly declined compared to 2023, it is still “significantly higher” than in 2019 – up by 10.6% per household, as shown by Bank of America’s data from January to mid-August. International travel remains a “one area of continued strength”, according to Bowley and Wadford.
In June, about 17% of Americans expressed plans to travel internationally within the next six months, an increase from around 14% in 2018 and 2019, as reported by a recent Conference Board survey.
Lower Airfares Boost Demand for International Travel
International travel has surged in the past two years as concerns about Covid-19 have diminished and countries have lifted travel restrictions. Americans have been eager to spend, fueled by a desire to travel and savings accumulated during the pandemic. Lower international airfare prices have supported this high demand, explained Hayley Berg, lead economist at travel site Hopper.
“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, the average cost of a round-trip ticket to Europe, the most popular destination for American tourists, fell to about $950 this summer, down from over $1,000 in the previous two years, Berg noted.
Hopper data, which tracked airfare prices for the past decade, shows that European fares were at their highest in 2022. A flight to Rome in the fall, typically a less busy travel period, now costs around $600, a significant drop from the pandemic peak of about $1,300.
Europe accounted for 43% of Americans’ international spending from May to July, according to Bank of America’ report. Canada and Mexico were the next most popular destinations, with 21% of spending combined. However, Asia has been the fastest-growing region for American tourists, with spending up 11% compared to 2023, versus a 3% increase in Europe. Favorable exchange rates have contributed to this growth.
Despite the increase in international travel spending, most Americans still prefer to vacation within the U.S. About 68% of trips originating in the U.S. remain domestic, based on a recent analysis by consulting firm McKinsey. “Domestic demand has softened slightly, as American travelers return abroad“, the McKinsey report said.