Foreign tourists kept home by higher air fares, exchange rate
NEW YORK - Overseas shoppers who once arrived in the United States with empty suitcases to take back holiday loot may decide to stay home this year amid high-priced airline tickets, unfavorable exchange rates, and lingering economic woes.
Consumers in the United States are already holding the line on spending, spooked by grim economic news, Wall Street's financial crisis, and rising layoffs. As the economic malaise makes its way around the globe, it's less likely tourists who gave US retailers a boost in the past will decide to shop overseas again.
"In places like the UK, France, Spain, and Germany, people there are much more hesitant for the outlook in their own countries, so they're probably much less likely to take a vacation in the US," said Adam Weissenberg, vice chairman of tourism, hospitality, and leisure for consulting firm Deloitte & Touche USA. "The rest of the world was doing OK through the summer, but October was just dismal."
The stronger dollar may also have travelers thinking twice about traveling thousands of miles for the holidays. After sliding for years, the dollar is gaining strength, making purchases in the United States less of a bargain than before.
Kate Lyes, of Brisbane, Australia, said she aimed to spend a few hundred dollars while shopping in New York City for 10 days at Macy's and other stores, but that's still down from the $500 the 19-year-old originally planned to spend a few months ago.
"It's the exchange rate," she said.
Airline tickets have also become more expensive, leaving many travelers pondering whether to make the trip. Passenger traffic on the world's airlines during September fell 2.9 percent from a year ago, marking the first decline in five years, according to the International Air Transport Association.
In previous years, international visitors have flocked to metropolitan areas like Chicago, Los Angeles, and New York - looking to catch a glimpse of retail landmarks like Tiffany and Macy's.
But this year, several retailers are already looking to the holiday season with trepidation, expecting fewer tourists to walk through their doors.
Macy's Inc. chief financial officer Karen Hoguet told analysts this month that tourism slowed in the second half of the third quarter in New York, the location of its famous Herald Square store.
"I suspect it has to do with tourism, but I can't tell you that definitively," Hoguet said.
At FAO Schwarz's flagship location in Manhattan, "tourism has declined noticeably," said chief executive Ed Schmults. "The US is still a relative bargain, but it's not the screaming deal it was in June and July."
As a way to jump-start sales to travelers, FAO Schwarz has duffel bags available that shoppers can use to take gifts back home with them. The company is also selling more low-priced, smaller items, which are easier to carry.
Lower international tourism may also hurt high-end jeweler Tiffany & Co. The company's chief financial officer, James Fernandez, said recently a stronger dollar may hurt the company this holiday season, but Fernandez reiterated that international tourism is not a significant component of total sales. US tourism is what matters more, Fernandez said.
Officials in New York, the top US destination for foreign tourists, expect figures to show that more international visitors came this year than the 8.7 million who arrived in 2007. But while the number may be rising, the city's retailers may still suffer.
International tourists account for 30 percent of visitors to New York City each year but more than half of total spending among visitors - meaning if they cut back, it's a larger hit.
"The retail industry is going to be the first one hurt when people come in to visit New York City because people are going to be spending money on experiences, not material things," said Kimberly Spell, head of public affairs for NYC & Co., the city's tourism and marketing organization. "That will probably hold for a lot of other cities too."
Some retailers are using targeted marketing to attract international tourists who know they want to travel and are searching for bargains.
Many outlet stores also specifically target tourists by teaming up with tour companies and offering brands that are popular with international shoppers.