US travel slowdown raises red flags for economy as consumers cut back

US travel slowdown raises red flags for economy as consumers cut back

US consumers are delaying vacation plans and scaling back on travel spending, raising concerns among economists that the broader economy may be losing momentum. For the first time since the Covid-19 pandemic, air traffic in the US declined over a 90-day period, according to Transportation Security Administration data analysed by TS Lombard, the Financial Times reported.

Air travel and hotel prices fall

Airfare and hotel rates dropped between April and May on a seasonally adjusted basis, according to the Bureau of Labor Statistics. The decline comes amid rising economic anxiety driven by President Donald Trump’s escalating trade war, which has fuelled fears of inflation and job losses. Hyatt CFO Joan Bottarini said guests are behaving more cautiously in the current uncertain environment.

Spending on airlines and lodging has fallen across all income levels compared with the previous year, Bank of America reported. The biggest cutbacks came from lower-income households, while higher-income consumers largely continued to prioritize travel and luxury experiences, leaving upscale hotels relatively unaffected.

Declining foreign tourism and domestic booking hesitancy

The US tourism industry is also suffering from a sharp drop in international arrivals. Canadian air travel to the US fell nearly 25% in May year-on-year, while visitors from France and Germany dropped more than 7% over the same period, due in part to political tensions and growing reports of hostile border encounters.

Domestically, consumers are waiting longer to make travel plans. Booking Holdings, which owns platforms like Booking.com and Kayak, noted a surge in last-minute bookings and shorter stays, making it harder for budget accommodations to command premium prices. Many hotels and campgrounds have been forced to cut prices or lower minimum stay requirements.

Americans trade down, not out

Rather than cancel trips entirely, many Americans are opting for budget alternatives such as shorter road trips or closer destinations. “Travel remains a priority for households but they’re trading down,” said Adam Sacks of Tourism Economics. Examples abound—from short-term rentals in North Carolina to campgrounds in Connecticut—where business has slowed despite price cuts.

Operators like Jaime Chandra, who runs a rental near Durham, and Lelah Campo, who manages campgrounds in Connecticut, report fewer bookings and rising guest anxiety about the economy and political situation.

A leading indicator of slowdown

Economists view the cooling travel sector as a potential early warning sign. “Travel has always been one of the best early indicators of a turn in the economy, because it is an expense most easily deferred,” said Steven Blitz of TS Lombard.

The travel cutbacks, especially among lower- and middle-income groups, suggest American consumer resilience may finally be fading—an ominous signal for the broader US economy.