American foreign vacations tell us something about the US economy

Forget Emily. These days, there is a whole flood of Americans in Paris.

People spent 2020 and 2021 either cooped up at home or traveling minimally mostly within the continental United States, but after Covid travel restrictions for international trips were lifted last summer, Americans are once again abroad.

While domestic leisure travel is showing signs of calming down — so are people Still on vacation In large numbers, but hotel and flight prices moderate as demand proves strong but not insatiable – overseas flights Back with a vengeance. Americans are taking planes and cruise ships to flock to Europe in particular, based on early data.

According to AAA estimates, international travel bookings for 2023 rose 40 percent from 2022 through May. That’s still down about 2 percent from 2019, but it’s a significant uptick at a time when some travelers have been holding back for a long time. Passport processing Delays amid high standard applications. Bookings for flights and cruises are expected to exceed pre-pandemic highs, with particularly strong demand for vacations in major European cities.

Paris, for example, saw a big jump in the number of tourists from North America last year compared to 2021, according to the city’s tourism office. Planned flights for July and August this year increased by another 14.4 percent – to nearly 5 percent above the 2019 level.

Said Steve Calvo, a Parisian tour guide and sommelier whose company was – Americans in Paris He visited Normandy and the French wine regions. Some attributed this jump to recovery from the pandemic and others to TV shows and social media.

“Emily in Paris: I have never seen so many people in Paris with red hats,” he said, noting that the signature The lead-in to the hit Netflix show started showing up on Tourists last year. Other newcomers are eager to take coveted photos for their Instagram pages.

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

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

“The constructive industry background is unlike anything any of us have ever seen,” Delta Airlines CEO Ed Bastian said during June 27. Investor Day. “Travel is going gangbusters, but it will continue to go gangbusters because we still have a massive amount of demand on hold.”

Transportation Security Administration data shows that the average daily number of passengers passed through checkpoints at US airports in June 2023 was 2.6 million, 0.5% higher than the June 2019 level, based on an analysis by Amir Sharif at Inflation Insights.

And at many foreign airports, the rush of American vacationers was evident: Customs lines swarmed with American tourists, from Charles de Gaulle in Paris to Heathrow in London. Saw the last 8 percent increase in traffic of North America in June 2023 over June 2019, based on airport data.

In a strange way, the rebound in overseas travel may take some of the pressure off inflation in the United States.

international flight fares, during the rise For some routes, they don’t make up much of the US consumer price index, which is dominated by domestic airfare. In fact, air ticket prices in an inflation measure fell sharply in June from the previous month and by nearly 19 percent from a year ago.

Partly because fuel is cheaper, and partly because airlines are sending more planes into the skies. Many pilots and air traffic controllers have been laid off or retired, so companies struggled to keep up when demand began to recover after the initial pandemic slump, sending prices soaring in 2022.

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

And as people flock abroad, it reduces some of the demand from hotels and tourist attractions in the United States. international tourists They are not back yet to the United States in full force, so they don’t quite make up for the wave of Americans going abroad.

Domestic travel is hardly in free fall — maybe 4th of July weekend travel New mode Records, per AAA — but tourists are no longer so insatiable that hotels can keep raising room rates indefinitely. Home away from home prices in the US by 4.5 percent in the year through June, much slower than the 25 percent annual increases achieved by hotel rooms last spring. there even Elbow room at Disney World.

Even if it’s not inflationary, the jump in foreign travel highlights something about the US economy: It’s hard to keep American consumers down, especially the well-to-do.

The Fed has been raising interest rates to moderate growth since early 2022. Officials have increased the cost of borrowing money in hopes of creating a multiplier effect that will lower demand and force companies to stop raising rates so much.

Consumption has slowed amid this onslaught, but not decreased. The minutes of the meeting showed that Fed officials took note, noting at their last meeting that consumption was “stronger than expected.”

Resilience comes as many families remain in a strong financial position. People who travel internationally tend to get richer, and many benefit from a rising stock market and still-high house prices, which are surprisingly starting to prove immune to interest rate moves.

Those without significant inventory 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’s not just vacation destinations that are feeling the momentum: Consumers are still spending on a range of Other services.

“There’s this recent bloating of spending,” said Kathy Bostancic, chief economist at insurance company Nationwide Mutual.

Consumer resilience could help the US economy avoid recession as the Fed fights inflation. As was the case in American hotels, a demand that stabilizes without falling may allow for a slow and steady moderation in the rise in prices.

But if consumers remain so marginalized that companies find they can still charge more, it could prolong inflation. This is why the Federal Reserve watches spending so closely.

Ms. Postjancic believes that consumers will ease up starting this fall. They are drawing down their savings, the job market is cooling, and it may simply take a while for the Fed’s interest rate increases to have their full impact.

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

“Despite the economic headwinds, we are seeing very strong demand for summer leisure travel,” said Mike Daher, president of U.S. transportation, hospitality and services at consulting firm Deloitte.

Mr. Daher attributes this to three driving forces. People missed flights. Social media is drawing many people to new places. And the advent of remote work is allowing professionals — “what we call laptops,” according to Mr. Daher — to extend vacations by working for a few days from the beach or the mountains.

Mr. Calvo, the tour guide, rides the wave, taking Americans on tours showcasing Paris’ shared history with France and leading them on minibus tours to Champagne.

“I have no idea if it will last,” he said.