Europeans aren’t flocking to the U.S. flagships like they used to.
This story first appeared in the May 31, 2012 issue of WWD. Subscribe Today.
The declining euro is dragging down tourism to the U.S. and traffic in the stores. Earlier this week the euro fell to its lowest level since July 2010 amid global concerns over the ability of Spain, Greece and other countries to restructure and manage debt. While the declining euro strengthens the dollar and makes it easier for U.S. retailers to import, it makes it more expensive for Europeans to travel to the U.S. Earlier this week the euro dropped below $1.25 for the second time this month. The euro closed just over $1.2503 on Wednesday.
While not pushing the panic button just yet, retailers are displaying concern as they notice fewer Europeans frequenting their big anchor locations in major cities. It’s in a marked contrast to last year, when droves of foreigners crammed the stores and translators were in demand.
“We are definitely seeing a slowdown in European tourist traffic,” Karen Katz, president and chief executive officer of the Neiman Marcus Group, said Tuesday. It’s mostly impacting the Bergdorf Goodman division, which is located on New York’s Fifth Avenue and 58th Street, but Neiman’s stores in such places as Union Square, San Francisco and Beverly Hills could also feel it.
The Saks Fifth Avenue flagship in Manhattan has historically been a magnet for tourists the world over but, like Bergdorf’s, it has some decline. “The tourist traffic is not as outsized as it once was, but it is still going at a healthy clip,” Stephen I. Sadove, chairman and ceo of Saks Inc., told WWD on Wednesday, after the Saks annual shareholder meeting.
According to sources, specialty chains also see some impact from declining tourism but with many more stores that are more spread out across the country compared with department stores, they are not nearly as affected by the drop.
According to Sadove, there are still big opportunities to increase the tourist traffic in such regions as south Florida, a mecca for visitors from Latin America, as well as the West Coast and Northeast. Sadove has been part of the lobbying effort, along with the National Retail Federation, to expedite visas for overseas tourists, which take a long time to get in certain countries such as China and Brazil. Aside from Saks on Fifth Avenue, tourism is most prevalent at the Saks stores in Boston, Los Angeles and Miami.
After Christmas last year, Bloomingdale’s chairman and ceo Michael Gould took a trip to Europe and upon his return, commented that Paris seemed filled with Chinese tourists, and, to a lesser degree, London did, too. “We need to make the Chinese, the Brazilians and tourists from other countries feel more welcome,” Gould told WWD at the time. Sources said tourists, including those from abroad and the U.S., account for between 25 and 30 percent of the volume at Bloomingdale’s 59th Street flagship in Manhattan. Gould declined to comment on the statistic.
Retailers’ lobbying efforts appear to have helped. An interagency government task force, formed in January by President Obama to develop a national plan to promote domestic and international travel opportunities, unveiled its blueprint and recommendations earlier this month. The task force aims to increase international visitors to the U.S. from a record 62 million in 2011 to 100 million by 2021. The task force estimates that these visitors would spend $250 billion annually. In January, Obama signed an executive order designed to reduce visa processing delays, increase tourism and create jobs in the U.S. “Tens of millions of tourists from all over the world come and visit America every year,” he said. “They stay in our hotels, they eat at our restaurants, they visit our attractions and they help create jobs. At a time when too many Americans are still looking for work, we need to make it easier for more people to visit this country and keep our economy growing.”
Obama charged the State Department and Department of Homeland Security with increasing visa processing capacity for tourists from China and Brazil by 40 percent in 2012 and ensuring that 80 percent of non-immigrant visa applicants are interviewed within three weeks of receiving their applications. The government is also moving to launch a campaign this year to encourage international travel and create within the Commerce Department a national travel and tourism office to research, focus efforts and measure results.
Last year, international travel to the U.S. generated $153 billion in receipts and supported 1.2 million jobs, the White House said. The Commerce Department forecasts 4 to 5 percent annual growth in tourism to the U.S. over the next five years, and that 65.4 million foreign travelers will visit the U.S. this year alone.