Hooray for Weak Dollar: Flood of Tourists Boosts Retailers’ Holiday Traffic

Foreigners could be the salvation of this year's holiday retail season.

While the sluggish economy and high gas prices may be leaving Americans feeling a bit pinched this season, overseas tourists, especially in New York, are shopping till they're dropping, thanks to the plummeting dollar.

"There's no question that [the tourists] are helping our New York performance by a few percentage points," said Stephen I. Sadove, chairman and chief executive officer of Saks Inc. "If you walk the New York store, you hear the number of foreign accents. We've seen people walking around the store with empty suitcases and heard about a group of women from Iceland who chartered a jet to come and shop our new shoe floor. The U.S. is on sale. It's a bargain for the European customer."

The dollar's weakness against the euro, pound and Canadian dollar has made shopping in the U.S. seem like a sample sale for tourists. Converted at Tuesday's exchange rates, the pound was worth $2; the euro, $1.47, and the Canadian dollar was on par with the American dollar.

"We're seeing outsize growth in jewelry, handbags, shoes and some of the designer brands," Sadove said. "We're seeing it mostly in New York, but we may be getting some [lift] in the major gateway cities like Los Angeles and Chicago."

New York City has been aggressively promoting itself overseas as a destination for everything from shopping and fashion to entertainment and food. A $30 million ad campaign consisting of TV, print, online and outdoor advertising bowed in the fall in 10 countries, including the United Kingdom, France, Ireland and Spain, and has the goal of attracting 50 million tourists to New York by 2015, according to Mayor Michael Bloomberg. The numbers are going in the right direction. In 2006, 43.8 million foreign tourists visited the city. The number in 2007 is estimated to be 45.5 million. "International visitation accounts for 17 percent of all trips to New York City, but generates 50 percent of all spending," said Christopher C. Heywood, a director at NYC & Company. Visitors from the U.K. spend about $235 a person a day, he said, while Irish tourists spend $389 a person daily."Obviously, it's a record-breaking year," said Michael Gould, chairman and ceo of Bloomingdale's. "It's a year, based in short, on the value of the dollar and the euro. Their disposable income and what they can buy is staggering. Everybody is benefiting from the tourist business. The 59th Street flagship and SoHo store are doing spectacular numbers. Business is good in other parts of the country, but not like New York."

Gould emphasized that as encouraging as the business from foreign shoppers may be, "This won't go on forever. It isn't just about the tourist business. The [domestic] customer wants to pay for things that are new. Our Chanel and Louis Vuitton numbers are stratospheric."

The Shops at Columbus Circle at the Time Warner Center on Manhattan's West Side has seen a 25 percent increase in foreign travelers this fall, and year-to-date sales at the center are up 25 percent. David Froelke, general manager of the center, said he's not sure there's a pure correlation between those two numbers, but other indicators point to the phenomenon. Foreigners now account for 50 percent of the center's total tourist traffic, compared with 35 to 40 percent last year. "Based on our demographic studies, local shoppers spend about $80 per visit," Froelke said. "Foreign tourists on average spend about $135."

At Hugo Boss' store at The Shops at Columbus Circle, foreign tourists increased to 35 percent from 15 percent last year and spend about $1,500 per visit. At Eileen Fisher's unit at The Shops, foreign travelers spend $1,000 per visit, twice as much as Americans.

Tumi's unit at The Shops said foreign customers have been rushing into the store on the last day of their visit to buy luggage to hold their purchases. The Mandarin Oriental Hotel, also at Time Warner Center, has even called Tumi on behalf of guests with morning flights to request the store open early, before regular hours.

At Coach's 595 Madison Avenue flagship, as well as its location at The Shops and Rockefeller Center, there's been an uptick in tourism. The Madison Avenue unit has seen the average spend of non-Japanese international tourists nearly double. Generally, larger handbags are popular, such as Legacy Leather Leigh Pocket Flap for $658 and the Bleecker Leather Large Flap, $448.Macy's Herald Square has always been a key tourist attraction, highlighted in international guidebooks, but this year, the sounds of non-English speaking shoppers are even more prevalent. "Clearly, the weakened dollar has impacted sales in New York City and Herald Square and is having a major impact on our business," said Ronald Klein, chairman and ceo of Macy's East. "Clearly the international tourist is reaping the benefits of the weakened dollar."

Klein said Macy's is seeing the rewards of the NYC & Company ad campaign. "What's good for New York is good for Macy's and what's good for Macy's is good for New York," he said. "We have a number of other stores that are located in popular international tourist destinations that are being impacted by the weaker dollar. All in all, it's a good thing."

International consumers at Saks were buoyed by the exchange rate. "We're here to shop and meet friends," said Leslie Ison, who lives in the U.K. "We're looking for designer goods." Ison and her companion, Andy Pearson, said Saks was their first stop after checking into a hotel. "Compared to what we would pay at home, it's half-price here," Pearson said.

"Marc Jacobs and Theory are very expensive in [South] Korea," said Kaeun Kim, who was visiting from that country. "It's much cheaper here, but I don't know if I can buy so much."

At Barneys New York, shoppers from Europe and Asia have been making beelines for the luxe collections. "It's clearly designer merchandise that they want," said Michael Celestino, executive vice president. "They're very knowledgeable about brands and they know the value of them and that they have an advantage. The majority of the growth seems to be coming from the European client. We have a continuous flow of international customers. It's always been a significant part of our client base. They may be shopping and spending more."

Henri Bendel has expanded its signature brown and white stripe program, which has always appealed to tourists. In addition to the traditional makeup cases, Bendel's has added leather tote bags, key fobs, snow globes and, in partnership with Villeroy & Boch, teapots, cups and saucers. "That part of our business is exploding," said Ed Bucciarelli, president and ceo. "Cashmere sweaters spiked over the weekend. Our candle business is on fire — no pun intended — we're picking up more than 100 percent in chocolate. We're hearing so many foreign languages being spoken in the store. Our atrium is a United Nations."Diane Levbarg, executive vice president of Missoni USA, is enjoying strong tourist sales, but her customers are not the Europeans tourists who take the Grayline bus shopping excursions to SoHo and Harlem. "I'm not experiencing this fabulous business from customers with euros or pounds buying at opening price points," she said. "If you're talking about wealthy Brazilians and South Americans as well as New Yorkers, then I'm seeing that. I'm experiencing [increases] at my price point, which has been affected by the euro, so my prices are high."

Nonetheless, Levbarg said Missoni's Madison Avenue store had its best month in the history of Missoni USA in November. "I'm getting double-digit increases," Levbarg said. "I'm doing my business with full-price resort, bathing suits and scarves. I'm not getting the euro-driven and pound-driven customers yet."

The downside of the tourist bubble, of course, is the high cost of buying and manufacturing goods in Europe. "There's a benefit in terms of tourism, but clearly the weak dollar has been putting some pricing pressure on the European goods and that puts pressure on the U.S. consumer," said Sadove of Saks. "We have to be careful that the price points aren't starting to get high. As the tourism comes in, it puts pressure on prices. We're starting to see the effects of that now. Clearly, American customers are starting to hold back. You may see some of that in designer apparel. It's just a factor you have to look at."

Los Angeles retailers, which have had their own surge in foreign tourists, are also sensitive to the high cost of European brands. The comparably high euro has forced Tracey Ross, owner of a namesake boutique on Sunset Boulevard, to cut back European orders by a third. "I don't go to Europe as much anymore because of the euro," she said. "I will revisit it when the economy gets better."

Nevena Borissova, owner of the Curve boutiques in Los Angeles and New York, said the weak dollar may cause her to cut back on the number of European designers she buys. "This is a first for me, but with this exchange rate, I see myself cultivating more of the designers here," she said.Tom Blumenthal, president and ceo of Gearys Beverly Hills, said tourism has been up this year and pointed to 90 percent-plus occupancy rates at Beverly Hills hotels. Tourism-related business at Gearys has grown by double digits over last year. "It is not just Europeans, we see a lot of Asians, South Americans and Mexicans," he said.

While the sagging dollar has complicated retailers' buying decisions, Gearys hasn't altered its merchandise strategy yet. "Our clientele still wants product made from the fine houses in Europe," said Blumenthal. "We are planning on moving forward with the same vendors."

"America's on sale, which should benefit retail in the gateway cities in the Southeast, such as Miami, Atlanta and Orlando," said Jeff Humphreys, director of economic forecasting for the University of Georgia Terry College of Business. Humphreys said international tourism is helping offset the real estate slump and cost-of-living issues that have been challenged Florida's economy.

At Bal Harbour Shops in Bal Harbour, Fla., tourists make up 60 percent of traffic and sales. Of that, international shoppers make up 40 percent, and the number is growing, according to Matthew Whitman Lazenby, general partner and director of leasing. "The demographics change, according to global economies and which markets are growing," he said, "but with the weak dollar, we're seeing more Russians, Eastern Europeans and British, as well as South Americans, who are always here."

Total sales for mall tenants not including anchor stores rose 21 percent for the year, and 28 percent in October. While November started slow, Black Friday weekend picked up, with sales of high-ticket items strong at the luxury center.

John Maus, owner of Maus & Hoffman, a men's and women's luxury specialty store with five units in South Florida and president of the Chamber of Commerce of Palm Beach, said the impact of international visitors has yet to be fully felt. "Our season runs from Thanksgiving to Easter, so we have yet to feel the full effect, but, we're already seeing Canadians back like we haven't seen in years. With the euro up 20 percent since June, we expect more German, Italian and British travelers."On Black Friday, European and Asian tourists hauling loaded shopping bags were as common as college students on Boston's Newbury Street. They hit Victoria's Secret, Nike Town, H&M and others. Marc by Marc Jacobs, also on Newbury Street, appeared to be a favorite. For most of the afternoon, the Marc checkout line stretched a dozen or more people deep. European tourists, in particular, carried armloads of small gifts, such as quilted vinyl clutches and totes.

The Wrentham Village Premium Outlets in Wrentham, Mass., which is about 30 miles west of Boston and features Burberry, Barneys New York and Tse Cashmere, hosted 1,000 European tourists on Black Friday who'd registered with the center, said Michele Rothstein, vice president of marketing for Chelsea Premium Outlet Centers. The outlet shoppers, predominantly Irish and British, traveled with empty suitcases and hauled off a mixture of classic American brands, such as Nike and Polo Ralph Lauren, and international luxury goods, Rothstein said. Some Wrentham stores have begun facilitating international shipping. Interest from abroad in American stores has clearly been piqued. Wrentham, for example, was recently visited by a crew from the BBC making a how-to segment about shopping for deals in the U.S., Rothstein said.

Todd Hanshaw, divisional merchandise manager and fashion director at the Wynn Las Vegas, who is in charge of the hotel's eight apparel and accessories shops, said customers are making the most of the exchange rates and buying in multiples. "In our more moderately priced store, a group of ladies from London came in and bought everything by a certain designer in their size," he said. "A woman from Paris was buying up a storm and snapped up every Christian Louboutin shoe we had in her size. When you're getting $1.60 to a euro, that's the mind-set. I know of Italians who are making trips to Las Vegas expressly to shop."

Hanshaw said how long the foreign buying streak will last is anybody's guess. "I'm thankful that we still have people buying," he said. "We're watching it and not changing our modus operandi."

— With contributions from Marcy Medina and Rachel Brown, Los Angeles; Georgia Lee, Atlanta, and Katherine Bowers, Boston