Globalism has led to a culture whereby we are comfortable with travel outside of the US. Traditionally, Americans have taken their annual vacation inside the US. A Gallup poll conducted ten years ago revealed that only 19% of Americans travelled outside the US for their vacation. This situation has changed somewhat in the last decade. Last year, a record 73 million Americans travelled abroad, with Europe, Asia and the Caribbean proving popular destinations. However, with the US economy in flux, how will this affect our travel habits?
Travel and tourism is a significant contributor to the global economy. The travel sector grew by 3.1% in 2015 and 2.8% in 2016. Growth in this sector is still outstripping world global economic growth, and this is likely to continue to do so for the next few years.
The USD and Travel
The travel industry currently supports in excess of 280 million jobs. US citizens love to travel, and long-haul travel has certainly benefitted from a strong US dollar. Americans get a lot for their money when they travel abroad, especially in Europe where sterling and the Euro are currently weak against the USD. As a result, long-haul travel has become increasingly popular in recent years.
Low oil prices have supported international travel for US citizens, and led to cheaper airfares and ground transportation prices. Your US dollars go a lot further in Europe and the Far East. Oil prices are unlikely to stay low throughout 2017, but US shale oil production is helping to keep prices depressed, which should ensure transportation costs, including airfares, stay low.
Looking ahead, the current situation is unlikely to change a great deal. With Trump in the White House, the American economic outlook is buoyant. Trump has promised to increase economic growth to 4%, and although this may not be achievable, GDP is predicted to stay in the ‘healthy’ range.
Greater Disposable Income
The unemployment rate is predicted to fall to 4.5% in 2017. Unfortunately, many employed people are stuck in part-time jobs, with lower job stability and lower wages. However, employment in the technical and professional sector is set to rise so many families will soon be enjoying greater earnings. On the downside, the pressures of the modern workplace have led to a decline in vacation time, with many employees not using their allotted vacation days.
Travel is a luxury, but cheaper oil prices and better employment prospects lead to a greater level of disposable income, which is likely to be spent on vacations and foreign travel.
Interest Rates and Tax Cuts
Interest rates are low and predicted to stay low for the next year at least. Low interest rates make debt more affordable, so families have greater financial resources to pay for travel.
The other issue to consider is whether Donald Trump goes ahead with the tax cuts he promised during his election campaign. If he does, higher earning Americans are likely to travel more.
Travel is not just about money, so whilst the US economy has a strong influence on whether Americans travel, safety issues will always take precedence.
Love Counting My Pennies?
Sign up to get our latest content by email.