Overall spending and travel momentum are driven by American demand for international trips.

• American demand for international trips has supported continued strength in overall travel spending.
• Declining prices for international airfare has helped underpin the trend.
• While Europe is the most popular destination abroad, Asia has experienced the greatest annual growth.

New Bank of America research shows that American households' travel spending is still higher than pre-pandemic levels, driven by a desire for international trips.

Vacationing abroad is a crucial element of travel momentum, according to economists Taylor Bowley and Joe Wadford at the Bank of America Institute, as they stated in a note on Wednesday.

Despite a slight decrease in overall travel spending from 2023, it is still "significantly higher" than 2019, with an increase of 10.6% per household, according to Bank of America credit and debit card data from January to mid-August.

"Dupes" are a good way to lower trip costs.

Bowley and Wadford stated that international travel remains a "strong area."

In June 2021, about 17% of Americans planned to travel abroad for vacation in the next six months, compared to 14% in both 2018 and 2019, as per a recent Conference Board survey.

Hayley Berg, lead economist at travel site Hopper, stated that she anticipates the demand to persist.

Lower airfares underpin international travel demand

The number of people traveling internationally increased significantly in the past two years due to decreasing health concerns related to Covid-19 and lifting of travel restrictions by countries.

Americans spent zealously amid pent-up wanderlust and a stockpile of cash.

High demand this year has been supported by falling prices for international airfare, according to Berg.

"The lower prices will likely increase international travel demand more than it has in the past few years," she stated.

The cost of round-trip fares to Europe, which is the most popular international destination for U.S. tourists, decreased to approximately $950 this summer, a decline from over $1,000 in the previous two years, according to Berg.

According to Hopper data, which spans a decade, European fares in 2022 reached their highest point on record.

The cost of a flight to Rome during the fall shoulder season has decreased from a pandemic-era high of approximately $1,300 to around $600, according to Berg.

The shoulder season in the fall is typically from September to November, bridging the gap between the high summer and low winter seasons.

From May to July, Americans spent the most in Europe, which accounted for 43% of their total spending, while Canada and Mexico combined held the second spot with 21% of spending.

The continent of Asia has experienced the most significant growth in spending, with a 11% increase compared to 2023, while Europe only saw a 3% increase, according to Bank of America. The bank attributed this growth to advantageous exchange rates.

Despite the continued strength of international travel spending, the majority of Americans are still choosing to vacation domestically, with approximately 68% of all trips originating within the US, according to a recent analysis by McKinsey.

American travelers are returning abroad, causing a slight decrease in domestic demand, according to McKinsey.

High earners 'splurge on travel'

According to Bank of America economists, it appears that households with an annual income above $125,000 are the primary drivers of the international travel trend.

According to a Bank of America report, high-end luxury hotels have outperformed standard offerings this summer, indicating that high earners are more resilient and continue to splurge on travel.

Despite the pandemic-era increase in inflation, most "cost-conscious" travelers plan to continue traveling, according to McKinsey.

Instead of canceling their trips, consumers are adjusting their behavior by traveling during off-peak periods or booking travel further in advance, according to McKinsey.