Money Goes Far in New York, if You’re European
By KATE HAMMER and JULIA WERDIGIER
nytimes.com
( It's like us going to...well, there really ISN'T any place we can go to. A buddy of mine is bitching about how expensive Latin America has become!)
Margaret Dragonette arrived in New York last week — three nieces, a cousin and loads of empty luggage in tow. By the time Ms. Dragonette, an administrative assistant for a nonprofit in Liverpool, was heading home, her group had filled six large suitcases and five carry-on bags. The bags were so stuffed with Juicy Couture T-shirts, Guess watches and Croc sandals that her nieces would have to wear the Ugg boots she was giving them for Christmas on the plane.
“Your money just keeps on going,” said Ms. Dragonette, awed at the buying power of her British pounds, each worth $2.03 at the time.
The dollar was so weak, said her cousin, a 27-year-old nurse, “We had trouble spending all our money.” Add a new superlative to New York’s long list: world’s most fabulous discount mall.
With the dollar near its lowest rate against the pound in 26 years, and its lowest rate against the euro ever, many Europeans are looking at the United States the way some Americans have long viewed Latin America and the Caribbean and, once upon a time, Europe — a cheap place to flex their strong currency.
The situation is more than a potential blow to Americans’ self-image, it could be a blow to the world economy as some central bankers worry about “currency tension,” and many countries move trillions of dollars out of their reserves and buy euros instead.
The dollar’s fall has been so drastic, it has seeped into the popular consciousness. In his last video, rapper Jay-Z cruised the streets of New York flashing not a stack of Benjamins, but a fistful of euros.
The dollar had been at relatively low levels against the pound and euro for most of this year, but in April it broke the $2 for £1 barrier and the exchange rate started to make headlines in Britain. Travel soared.
“You already got high-quality holidays and friendliness and now you even got the good prices,” said Alan Waddell, chief operating officer of Visit USA in London, which promotes British travel to the United States.For a new breed of European tourists, working-class and first-time visitors, the weak dollar is more than an everything-off coupon. “It means we can come,” said Inaki Benito, a 27-year-old bus factory worker from Vitoria, Spain, who never thought he would be able to afford a two-week stay in New York.
Even with the weak dollar, Mr. Benito and his traveling companion, Eneko Ruiz-de-Samanie, a tire factory worker, had to rent an apartment in the Bronx rather than stay in hotels, so they would have money during for shopping and Broadway shows.
“This year is unbelievable," said George Chaves, the guest relations manager at Fitzpatrick Hotels, two Manhattan hotels catering to British and Irish tourists, for the last six years. “We’re seeing families of modest means, they’re here for the first time and they can’t believe the purchasing freedom and the spending power they have."
A standard room at one of the Fitzpatrick hotels costs about $460 a night.
Though statistics are not kept by tourists’ economic class or income level, anecdotal evidence from travel agents and hoteliers, as well as New Yorkers, suggested there was a huge wave of new visitors to New York over the summer. The number of tourists from Britain, for instance, was up 22 percent in August 2007, compared with August 2006.
The year-over-year increase for September was only 6 percent, but indications were that this fall’s travelers were more well-traveled and even less budget-conscious.
More guests at Mr. Chaves’s hotels are seeing Broadway shows, from the orchestra seats, and he is making more reservations for them at expensive uptown steakhouses like Bobby Van’s, Maloney & Porcelli and Smith & Wollensky. (No word on whether the flush Europeans are tipping.)
Matthias Jungkind, a 34-year-old financial controller from Düsseldorf, Germany, finds the low exchange rate laughable, literally. Every time he saw the dollar price tag on an item, he said, he giggled involuntarily.
But monetary authorities are not laughing. The dollar has been so low for so long, Europeans are worrying about how expensive their exports are becoming for American consumers when priced in dollars, and how much that hurts European growth.
Last month, Mervyn King, the governor of the Bank of England, warned that an appreciating pound and euro, combined with most oil-producing countries and China linking their currencies to the dollar, creates “great currency tension.”
Such tension could hurt the dollar further as countries like China, which holds the largest reserves of American currency outside the United States, see their dollar reserves sink in value and hurry to move them to other currencies. A Chinese official threatened to do that last month, though other leaders contradicted him.
Still, an estimated $1.2 trillion in dollar holdings will move to other currencies over the next five years, economists at Merrill Lynch said. In May, Kuwait dropped its currency’s link to the dollar, and in October, Iraq said it wanted to diversify its heavily dollar-dominated reserves. Other countries, including Qatar, have complained about the negative effect of the weakening dollar on their reserves.
“The current currency system is quite fragile and will break down as it leads to imbalances and capital losses” among countries with dollar reserves, said Nouriel Roubini, a professor at the Stern School of Business at New York University.
It is still less clear whether one or several currencies will replace the dollar as the main reserve currency. “With the euro, the world has gained an alternative reserve currency but other currencies have also won in strength,” said Chris Munns, a lecturer at the London School of Economics.
Whatever the long-term effect of the strong euro (and the weak dollar), in the short run the current exchange rate could serve American interests, not only because it helps reduce the current- account deficit, but also because Europeans could help save what is expected to be a somber holiday shopping season, even though retail sales figures for November, released Thursday, were better than anticipated.
Europeans are descending on the nation’s shopping malls and department stores at the highest rate in seven years.
International travelers are expected to spend $92 billion in the United States in 2007, 7.5 percent more than last year, according to the Commerce Department. The number of visitors from abroad, including those from Canada and Mexico, is expected to rise 5 percent to 53.6 million this year, but Europeans make up the largest group of overseas visitors to the United States, with about 35 percent of them visiting New York City.
Low prices should keep them coming. Increasing demand tied to the weak dollar has set off a price war among trans-Atlantic airlines, pushing prices to new lows, said Sean Tipton, spokesman for the Association of British Travel Agents in London.
Holly Lancaster, a 52-year-old airline customer service agent from Miami, said she was experiencing tourist envy after a November trip to Greece. “I just couldn’t do as much with my money as I wanted,” she said.
Phillip Kwong, a 29-year-old systems analyst from Queens is just happy somebody — anybody — is spending money this holiday season. “It’s actually better for our economy that more Europeans are coming here to spend their money,” he said. Most surprising, despite the visible increase of European tourists in places like New York, overall travel to the United States is still below pre-Sept. 11 levels, according to Cathy Keefe of the American Travel Industry Association. Overseas travel is down 17 percent from its peak in 2000. Without the positive effects of the weak dollar, “we can’t imagine what the numbers would be right now,” she said.
Many airlines say that the travel frenzy among Europeans is a wash, since the weak dollar means fewer Americans are traveling in the other direction.
Until that two-way traffic returns, European travelers can take advantage of a favorable exchange rate and cheap flights to get an effectively free holiday, once you factor in what they save on shopping. “You just have to shop enough,” said Mr. Tipton of the British travel agency association.
Copyright 2007 The New York Times Company |
