Domestic Travel Demand Carries U.S. Tourism as Airfares Jump 23%

A Year Carried by Domestic Trips

In 2026, the American travel economy has not grown so much as rearranged itself. Americans are still traveling in large numbers, but they are taking shorter, cheaper and closer trips. Meanwhile, international visitors keep slipping away, and airfares have risen at a pace not seen in years. Overall demand is holding up, but it now depends almost entirely on domestic travelers, and their spending is increasingly concentrated in higher-income households.

The U.S. Travel Association's spring forecast sets the baseline. It projects total travel spending of $1.37 trillion in 2026 and $1.42 trillion in 2027, in inflation-adjusted terms, with real growth of only about 1% this year before it picks up to 3% in 2027 and 2028.11 Domestic travel accounts for 87% of that total. At roughly $1.20 trillion, it has returned to its 2019 level after adjusting for inflation.11 Domestic leisure spending is forecast to rise 0.9% to $909 billion. It is the only segment of the industry spending more than it did before the pandemic in real terms.1116

Coverage of the forecast agrees on the main point: domestic demand is carrying the industry. Outlets differ on emphasis. Trade publications called the $1.37 trillion figure a record.1619 Others pointed to the thin 1% real growth rate and to inflation, gas prices and geopolitical uncertainty, including the U.S.-Israel war on Iran, as the forces holding growth down.13 Both framings are accurate. The dollar total is a record, but in real terms the industry is barely growing.

The Summer Season: Strong Volume, Little Growth

The summer season showed the same pattern: large numbers with little growth beneath them. AAA projected that a record 72.2 million Americans would travel at least 50 miles over the Independence Day week, just above last year's 71.8 million. AAA itself noted that the increase was smaller than in recent years.18 Car travel was essentially flat at 61.4 million, despite gas prices at four-year highs. Domestic air travel rose only 0.2% to 5.85 million passengers.18 The strongest growth came from buses, trains and cruises, up 5.3% to 4.93 million. AAA credited cruises' appeal to travelers who want to know the full price up front.18

Surveys of traveler intentions showed the same divide. Priceline found that 79% of Americans still planned at least one summer trip, and 36% said they were cutting everyday spending to pay for it.20 A Talker Research survey for Current, however, found that four in ten Americans would not travel at all this summer because of cost, and more than half of that group said they simply could not afford a vacation.20 Experian reported that two-thirds of consumers found travel less affordable than in 2025.20 Planned summer trips with paid lodging fell to 45%, a six-year low, even as trip budgets rose 17%.19

Those results fit together. Fewer households are traveling, and the ones that do are spending more. Reuters described the season in K-shaped terms: budget travelers delayed or cancelled trips, while affluent travelers kept their plans and bought premium cabins, where fares rose only about 7%, far less than in economy.23 U.S. Travel's forecast makes the same point, saying travel spending is being driven by higher-income households and that cost-sensitive travelers are moving toward shorter regional and drive-to trips.11

Booking data supports the domestic shift. Expedia found that 63% of U.S. travelers planned a domestic summer trip, and searches for outdoor destinations such as lakes, mountains and national parks were up 65%.20 JustFly reported domestic search demand up more than 34% year over year, while international searches fell 17.4%.20 InteleTravel said outbound international summer bookings were down by a quarter.23 Not every data point agrees. Deloitte found the share of summer flyers planning international trips rose from 27% to 32%.20 One plausible explanation is that wealthier travelers kept flying abroad while mass-market demand turned inward. That would also fit August data showing Americans spent $19.7 billion abroad, up 0.5%.4

Airfares Lead the Price Increases

The biggest cost pressure this year has come from airfares. The consumer price index for airline fares rose 26.7% year over year in May, according to The New York Times, which noted that United, Delta and American had each reported fuel costs up more than 10% in their April earnings.21 The increases started earlier: fares were up 14.9% in March and more than 20% in April.2423 Southwest CEO Bob Jordan said the fare increases since February were the largest he could recall in his 38 years in the industry.23 Fare inflation stayed above 20% all summer: 26.5% in June, 25.5% in July and 23.4% in August.26

The main driver is fuel. Bureau of Transportation Statistics figures show airlines paid an average of $3.40 per gallon for jet fuel in July, up from $2.34 a year earlier.28 Capacity matters too. Travelers who hoped to wait for lower fares found few discounts, because airlines had cut capacity and planes were still full.27 The size of the increase depends on the measure. Points Path estimated cash fares for the summer were up about 15% domestically and 12% internationally, well below the CPI figures.2722 That gap is a reminder that the price index tracks market-wide changes, not what any one traveler paid.28

Driving is not much cheaper. Gasoline was up roughly 27% year over year in both June and August, which reduces the savings that usually push budget travelers toward road trips.2528 U.S. Travel's Travel Price Index rose 8.1% in June, well above the 3.5% rise in overall consumer prices.25

Hotel Rates: Moderate Overall, Uneven by Market

Hotel prices have risen far less than airfares, and the reporting on them varies more. CPI data showed hotel rates up about 5% in May, a rise the Times linked partly to World Cup demand.21 The rate of increase then slowed: hotel prices were up 4.8% year over year in June, falling 2.8% from May, and up 2.9% in August.2526 In late 2025, one forecast expected hotel rates to rise faster than airfares in 2026.29 The opposite happened.

Around major events, prices moved sharply. HotelPlanner reported July 4 hotel demand up 48% and average rates up 30%.20 Industry-wide figures stayed positive. In August, occupancy reached 66.4% and revenue per available room (RevPAR) rose 2%. CoStar and Tourism Economics raised their full-year RevPAR forecast to 4.4% growth.19 Other reports, however, put resort RevPAR down 3.5% and short-term rental demand down 2.3%, with gateway markets such as Miami and New York hit hardest.5 Taken together, the figures suggest hotels are doing well on average, but properties that rely on international guests are struggling.

The International Shortfall

Inbound travel is the weakest part of the picture. International arrivals fell for nine straight months through January.18 In April, they dropped 14.1% to 2.6 million, wiping out small gains from February and March.3 The decline came after 2025, when the U.S. received about four million fewer foreign visitors than in 2024.3 Reported causes include higher airfares and fuel costs, disruption from overseas conflicts, friction over entry policies, and a pullback by Canadian travelers.123 Skift reported that a proposed rule requiring Visa Waiver Program travelers to disclose five years of social media history could discourage visitors further.1

The most recent data is the weakest so far. International visitors spent about $19.9 billion in the U.S. in August, down nearly 5% from a year earlier, according to the National Travel and Tourism Office.6 Spending on lodging, restaurants, recreation and shopping fell nearly 9% to $10.8 billion.46 The U.S. Travel Association linked the decline to an 11.8% drop in overseas arrivals.7 Because Americans' spending abroad roughly matched visitors' spending here, the monthly travel trade surplus shrank to $157 million.4 Through August, international visitors spent about $165 billion, down nearly 1% from 2025.6

That data undercuts the spring forecast. In May, U.S. Travel expected inbound travel to rise 1.6% this year, helped by the World Cup.13 So far, the World Cup has not produced that rebound. Some estimates should be treated with caution, however. One outlet reported a $14 billion tourism trade deficit, but federal data shows a cumulative surplus of about $5.6 billion through August.96 The NTTO numbers also measure spending, not visitor counts, so they do not show that international travelers have abandoned the U.S. outright.4

Assessment

The shift toward domestic travel is real, but it is largely defensive. Americans are choosing trips closer to home mainly because flights and fuel have become expensive and foreign visitors are staying away, not because domestic demand is especially strong. Domestic travel can keep total volume up. It cannot easily replace the higher spending of long-stay international visitors, a gap that industry observers have pointed out themselves.12

The 2027 outlook depends on whether fuel costs ease and inbound travel bottoms out. U.S. Travel's forecast for 3% growth in 2027 assumes both.11 Until airfares come down, 2026 will be a year of large travel volumes and very little real growth.