New York restaurant owner Jeremy Merrin has seen business droop in recent weeks at his Havana Central eatery in Times Square. The reason: not enough international tourists.
“We're fighting a double-whammy,” said Merrin, who owns three restaurants and is on the board of the New York State Restaurant Association. “Not only is the dollar going up and making things more expensive, Europe as a whole is not doing well.”
International tourists to the US spend more than $200 billion annually on travel, hotels, dining and shopping, but growth in 2015 is expected to decelerate as would-be visitors balk at the stronger dollar and grapple with weaker economies at home.
“That could impact the length of their stay and the composition of their spending in the United States,” said David Huether, senior vice president, research, at the US Travel Association, which sees the influence of the stronger dollar becoming more severe in 2015’s second half.
Travel experts hope some of the drop in spending will be made up for by increased tourism from China, where visitors can now get a visa that lasts 10 years.
Lower fuel prices and a stronger US economy also may encourage more domestic travel, they said.
Still, some retailers, including Tiffany and Co, are already feeling the impact.
“The strong dollar has created headwinds for foreign tourists in the United States,” said Mark Aaron, vice president of investor relations at Tiffany, which warned of slower sales to tourists at its flagship New York store.
“Tiffany is the first poster child of this issue,” said Craig Johnson, president of consulting firm Customer Growth Partners.
He said the trend could slow the growth of other successful US luxury brands that depend heavily on tourists.
The dollar has climbed about 15 per cent against the yen and the euro over the past six months.
Chris Gaffney, senior market strategist at EverBank Wealth Management in St Louis, expects the strong dollar will affect a number of US sectors that serve foreign tourists, including airlines, hotels, and retail.
Companies with tourism operations abroad could see relief because “for American tourists, Europe is on sale”, he said.
A 10 per cent appreciation in the dollar typically results in about two per cent fewer international visitors annually, said Adam Sacks, president of consulting company Tourism Economics, which expects the number of overseas visitors to climb by 3.5 per cent in 2015, compared with five per cent annual growth over the past 10 years.
Growth in the number of foreign tourists coming to the US had already started to slow last year, largely because of economic problems in home countries.
“Despite the higher dollar, the Chinese have saved money to travel,” said Evan Saunders, chief executive and co-founder of Attract China, which expects many more Chinese tourists this year.
“They want to do what they have seen in TV shows or American movies,” he said.