Forget Emily. There’s a flood of Americans in Paris these days.
People spent 2020 and 2021 either confined at home or traveling sparingly and mostly within the continental US. But after Covid travel restrictions on international travel were lifted last summer, Americans are traveling abroad again.
While domestic leisure travel is showing signs of calming down — people are still taking large vacations but hotel and flight prices are moderating as demand proves strong but not insatiable — outbound travel is back on full swing. According to initial data, Americans board planes and cruise ships to flow primarily to Europe.
AAA estimates that international travel bookings for 2023 increased 40 percent from 2022 to May. That’s still around 2 percent down from 2019, but it’s a sharp increase at a time when some travelers are being held back by long delays in passport processing due to a record number of applications. Tour and cruise bookings are expected to surpass pre-pandemic highs, with demand for holidays to major European cities being particularly strong.
Paris, for example, saw a huge increase in North American tourists last year compared to 2021, according to the city’s tourism bureau. Scheduled flight arrivals for July and August this year rose a further 14.4 percent – to nearly 5 percent above 2019 levels.
“This year has been absolutely crazy,” said Steeve Calvo, a Parisian tour guide and sommelier whose company – The Americans in Paris – chocks out visits to Normandy and French wine regions. He attributes the jump partly to the recovery from the pandemic and partly to TV shows and social media.
“‘Emily in Paris’: I’ve never seen so many people wearing red berets in Paris,” he said, noting that the heroine of the popular Netflix series’ signature chapeau began to appear among tourists last year. Other newcomers are eager to snap coveted photos for their Instagram pages.
“In Versailles there is the Hall of Mirrors, I call it the Selfie Room,” Mr Calvo said, referring to a famous room in the palace.
Robust travel booking numbers and tour guide anecdotes align with corporate statements: from airlines to American Express, corporate executives are reporting continued demand for flights and vacations.
“The constructive industry backdrop is unlike anything we’ve ever seen,” Delta Air Lines CEO Ed Bastian said during a June 27 investor day. “Travel is great fun, but it will continue to be great fun because we still have tremendous demand.”
Data from the Transportation Security Administration shows that the daily average number of passengers passing through checkpoints at US airports in June 2023 was 2.6 million, up 0.5 percent from June 2019 levels, based on an analysis by Omair Sharif at Inflation Insights.
And the influx of American vacationers is noticeable at many international airports: the customs queues are full of US tourists, from Charles de Gaulle in Paris to Heathrow in London. According to airport data, the latter recorded 8 percent more traffic from North America in June 2023 than in June 2019.
Oddly enough, the recovery in outbound travel may ease some of the pressure on US inflation.
International airfares, while rising sharply on some routes, do not account for a large proportion of the US CPI, which is dominated by domestic airfares. In fact, air fares in June fell sharply month-on-month as measured by inflation, and are down nearly 19 percent year-on-year.
That’s partly because fuel is cheaper, partly because airlines are sending more planes into the skies. Many pilots and air traffic controllers had been laid off or retired, leaving companies struggling to keep up as demand began to recover from the initial onset of the pandemic, sending prices significantly higher in 2022.
“We just didn’t have enough seats last year,” Mr Sharif said, explaining that the supply situation has been better so far this year, although staffing issues persist. “The planes are still totally full, but there are more planes.”
And as people flock abroad, demand for hotels and tourist attractions in the United States is falling. International tourists have not yet returned to the United States in full numbers, so they cannot fully offset the wave of Americans going abroad.
Domestic travel is hardly in free fall — Fourth of July weekend travel has likely set new records, according to the AAA — but tourists are no longer so voracious that hotels can increase room rates indefinitely. Prices for lodging away from home rose 4.5 percent in the U.S. for the year through June, far slower than the 25 percent annual gains hotel rooms posted last spring. There’s even freedom of movement at Disney World.
While not inflationary, the surge in outbound travel illustrates something about the US economy: It’s difficult to rein in US consumers, especially the wealthy ones.
Since early 2022, the Fed has been raising interest rates to cool growth. Officials have made borrowing more expensive, hoping to create a ripple effect that would curb demand and force companies to stop raising prices as much.
Consumption has slowed in this onslaught, but has not declined. Fed officials took note, noting at their last meeting that consumption was “greater than expected,” according to the minutes.
The resilience comes as many households remain in sound financial health. People who travel internationally are wealthier, and many are benefiting from a rising stock market and still-high house prices that are beginning to prove surprisingly immune to interest rate movements.
Those who don’t have large stock or real estate holdings are experiencing a strong job market, and some are still holding on to the extra savings accumulated during the pandemic. And it’s not just holiday destinations that are feeling the upswing: consumers continue to spend money on a range of other services.
“There’s this latest spending spree,” said Kathy Bostjancic, chief economist at insurance company Nationwide Mutual.
It could be that consumer resilience will help the US economy avoid a recession while the Fed fights inflation. As with American hotels, stabilization in demand without a slump could allow for a slow and steady moderation in rate hikes.
However, if consumers continue to be so starved that companies realize they can always ask for more, it could prolong inflation. That’s why the Fed is keeping a close eye on spending.
Ms. Bostjancic assumes that consumers will decrease from autumn. They’re using up their savings, the job market is cooling off, and it could just be a while before the Fed’s rate hikes take full effect.
But there is still no end in sight for many types of travel.
“Despite the economic headwinds, we are seeing very strong demand for summer vacation travel,” said Mike Folger, who heads the US transportation, hospitality and services practice at consultancy Deloitte.
Mr. Therefore, attributes this to three driving forces. People missed outings. Social media is attracting many to new places. And the advent of remote work is allowing professionals – “who we call laptop transporters,” according to Mr. Folge – to extend their vacation by working a few days away from the beach or in the mountains.
Mr. Calvo, the tour guide, rides the wave, taking Americans on tours that showcase the shared history of Paris and France and driving them to Champagne in minivan tours.
“I have no idea if it will last,” he said.