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America’s Foreign Vacations Tell Us Something About the US Economy – Trending2days


To install Emily. These days, a whole flood of Americans are in Paris.

People spent 2020 and 2021 either cooped up at home or traveling sparingly and mostly within the continental US. But after Covid travel restrictions were lifted for international trips last summer, Americans are again headed overseas.

While domestic leisure travel shows signs of calming—people are still vacationing in large numbers, but prices for hotels and flights are moderating as demand proves strong but not insatiable — foreign trips are snapping back with a vengeance. Americans are boarding planes and cruise ships to flock to Europe in particular, based on early data.

According to estimates from AAA, international travel bookings for 2023 were up 40 percent from 2022 through May. That is still down about 2 percent from 2019, but it’s a hefty surge at a time when some travelers are being held back by long passport processing delays amid record-high applications. Tour and cruise bookings are expected to eclipse prepandemic highs, with especially strong demand for vacations to major European cities.

Paris, for example, experienced a huge jump in North American tourists last year compared with 2021, according to the city’s tourism bureau. Planned air arrivals for July and August of this year climbed by another 14.4 percent — to nearly 5 percent above the 2019 level.

“This year is just completely crazy,” said Steeve Calvo, a Parisian tour guide and sommelier whose company — The Americans in Paris — has been churning out visits to Normandy and French wine regions. He attributes some of the jump to a rebound from the pandemic and some to television shows and social media.

“‘Emily in Paris’: I never saw so many people in Paris with red berets,” he said, noting that the signature The chapeau of the popular Netflix show’s heroine started to pop up on tourists last year. Other newcomers are eager to take coveted photos for their Instagram pages.

“In Versailles, the Hall of Mirrors, I call it the Hall of Selfie,” Mr. Calvo said, referring to a famous room in the palace.

Robust travel booking numbers and anecdotes from tour guides align with what companies say they are experiencing: From airlines to American Express, corporate executives are reporting a lasting demand for flights and vacations.

“The constructive industry backdrop is unlike anything that any of us have ever seen,” Ed Bastian, the chief executive officer at Delta Air Lines, said during a June 27 investor day, “Travel is going gangbusters, but it’s going to continue to go gangbusters because we still have an enormous amount of demand waiting.”

Transportation Security Administration data shows that the daily average number of passengers who passed through US airport checkpoints in June 2023 was 2.6 million, 0.5 percent above the June 2019 level, based on an analysis by Omair Sharif at Inflation Insights.

And in many foreign airports, the burst of American vacationers is palpable: Customs lines are packed with US tourists, from Paris’s Charles de Gaulle to London’s Heathrow. The latter saw 8 percent more traffic from North America in June 2023 than in June 2019, based on airport data.

In a weird way, the rebound in foreign travel may be taking some pressure off US inflation.

international flight prices, while surging for some routes, are not a large part of the US Consumer Price Index, which is dominated by domestic flight prices. In fact, airfares in the inflation measure dropped sharply in June from the previous month and are down nearly 19 percent from a year ago.

That is partly because fuel is cheaper and partly because airlines are getting more planes into the sky. Many pilots and air traffic controllers had been laid off or had retired, so companies struggled to keep up when demand started to recover after the initial pandemic slump, pushing prices sharply higher in 2022.

“We just didn’t have enough seats to go around last year,” Mr. Sharif said, explaining that while personnel issues persist, so far this year the supply situation has been better. “Planes are still totally packed, but there are more planes.”

And as people flock abroad, it is sapping some demand from hotels and tourist attractions in the United States. International tourists have yet to return to the United States in full force, so they are not entirely offsetting the wave of Americans headed overseas.

Domestic travel is hardly in a free fall — July 4 weekend travel probably set new records, per AAA—but tourists are no longer so insatiable that hotels can keep raising room rates indefinitely. Prices for lodging away from home in the US climbed by 4.5 percent in the year through June, which is far slower than the 25 percent annual increases hotel rooms were posting last spring. there is even elbow room at Disney World,

Even if it isn’t inflationary, the jump in foreign travel does highlight something about the US economy: It’s hard to keep US consumers down, especially affluent ones.

The Fed has been raising interest rates to cool growth since early 2022. Officials have made it more expensive to borrow money in hopes of creating a ripple effect that would cut into demand and force companies to stop lifting prices so much.

Consumption has slowed amid that onslaught, but it hasn’t tanked. Fed officials have taken note, remarking at their last meeting that consumption had been “stronger than expectedminutes showed.

The resilience comes as many households remain in solid financial shape. People who travel internationally skew wealthier, and many are benefiting from a rising stock market and still-high home prices that are beginning to prove surprisingly immune to interest rate moves.

Those who do not have large stock or real estate holdings are experiencing a strong job market, and some are still holding onto extra savings built up during the pandemic. And it is not just vacation destinations feeling the momentum: Consumers are still spending on a range of other services,

“There’s this last blowoff of spending,” said Kathy Bostjancic, chief economist for the insurance company National Mutual.

It could be that consumer resilience will help the US economy avoid a recession as the Fed fights inflation. As has been the case at American hotels, demand that stabilizes without plummeting could allow for a slow and steady moderation of price increases.

But if consumers remain so ravenous that companies find they can still charge more, it could prolong inflation. That’s why the Fed is keeping a close eye on spending.

Ms. Bostjancic thinks consumers will pull back starting this fall. They are drawing down their savings, the labor market is cooling, and it may simply take time for the Fed’s rate increases to have their full effect.

But when it comes to many types of travel, there is no end in sight yet.

“Despite economic headwinds, we’re seeing very strong demand for summer leisure travel,” said Mike Daher, who leads the US Transportation, Hospitality & Services practice at the consulting firm Deloitte.

Mr. Daher attributes that to three driving forces. People missed trips. Social media is luring many to new places. And the advent of remote work is allowing professionals—”what we call the laptop luggers,” per Mr. Daher—to stretch out vacations by working a few days from the beach or the mountains.

Mr. Calvo, the tour guide, is riding the wave, taking Americans on tours that showcase Paris’s shared history with France and driving them in minivan tours to Champagne.

“I have no clue if it’s going to last,” he said.


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