In the early months of 2025, U.S. consumer spending on air travel, hotels, and restaurants saw a notable decline, signaling a shift in spending habits amid economic uncertainty. According to data from Bloomberg Second Measure, U.S. consumer spending on air travel dropped by 10% in February 2025, while spending on hotels decreased by 6%, compared to the same time last year. In addition, restaurant spending saw a 3.5% decrease, further highlighting the broader trend of reduced consumer expenditures.

This downward trend in travel-related spending has continued consistently through the first quarter of 2025. Every week in the year leading up to March 24, spending on airfares and hotels has been lower compared to the same weeks in 2024. Bank of America Institute's latest report, which tracks credit card and debit spending, reveals that for the year through March 22, lodging and tourism services experienced a 2.5% dip in consumer spending, while air travel spending was down approximately 6% year over year.

The Bank of America report, which captures data from 69 million U.S. cardholders, also reveals that the spending information primarily covers brick-and-mortar businesses located over 500 miles from a cardholder’s home, meaning it excludes much of the spending associated with local travel. However, it still provides valuable insights into broader trends, showing a significant shift in consumer spending behavior.

The slowdown in travel spending comes as several major U.S. airlines have reduced their forecasts for 2025, citing weaker demand for domestic air travel. This decline is believed to be driven by decreased consumer confidence, which has been influenced by the overall economic uncertainty. Virgin Atlantic's CFO, Oli Byers, mentioned in a recent report that U.S. demand for air travel had started to slow down in recent weeks, which he attributed to general consumer uncertainty.

Historically, lower consumer confidence has been closely linked to a reduction in discretionary spending, which includes expenses for vacations and non-essential goods and services. According to David Tinsley, senior economist at Bank of America Institute, "The spending you're going to do on travel is going to be one of the biggest items of spending you do in the year …and also one of the most obvious things you can pull back on if you're concerned about the economy." With Americans increasingly cutting back on non-essentials, the impact on travel-related expenditures has been pronounced. Scott Hoyt, senior director of economic research at Moody’s Analytics, warned that this may be the beginning of a broader trend of weaker consumer spending, especially on discretionary items, as spending growth continues to slow.

The drop in consumer spending is also expected to impact the broader U.S. economy. In 2024, U.S. travelers directly spent $1.3 trillion, generating an economic output of $2.9 trillion and supporting over 15 million American jobs, according to the U.S. Travel Association. As recently as early January 2025, the U.S. Travel Association had projected a 3.9% growth in total travel spending, aiming for $1.35 trillion in 2025. However, with consumer spending on travel slowing, these projections are now being revised down.

Hoyt emphasized that discretionary spending, particularly on items like travel, is under significant pressure. "Discretionary spending is in consumers’ crosshairs right now and is going to be weaker going forward," he said. The combination of slower economic growth, increased prices, and weakened consumer confidence is contributing to a more cautious approach to non-essential purchases, with travel being one of the most obvious categories to experience reductions.

There are also concerns about the potential impact of President Donald Trump’s tariffs, which are expected to raise prices for goods and services across the economy. These tariffs could exacerbate the challenges already facing the travel industry by further raising costs and dampening consumer confidence. "We're certainly very concerned because we think the drivers are going in a bad direction," Hoyt noted, referring to the potential negative effects of the tariffs on consumer spending.

While domestic travel is slowing, international inbound travel to the U.S. is facing challenges for different reasons. Tariffs and anti-foreign rhetoric are having a negative effect on international tourism, with experts warning that these factors are setting back global travel to the U.S. by several years. Adam Sacks, president of Tourism Economics, which tracks tourism statistics, expressed concerns that these trends will continue to hamper inbound travel.

The slowing of consumer spending on air travel, hotels, and tourism-related services marks a significant shift in the U.S. economy. As Americans face economic uncertainty, discretionary spending—particularly in areas like travel—remains one of the easiest expenses to reduce. With forecasts now pointing to continued declines in travel spending, U.S. businesses and policymakers will need to adapt to these new economic realities. Strengthening consumer confidence and addressing the challenges of rising costs will be essential in reversing these trends. Until then, the future of U.S. tourism and travel remains uncertain, with consumers prioritizing savings and reducing expenditures on non-essential goods and services.