How the strong dollar is hurting American tourism

Mark Garrison Jan 5, 2016

How the strong dollar is hurting American tourism

Mark Garrison Jan 5, 2016

The dollar is strong, which is great news for Americans headed abroad and tough luck for foreign visitors coming to the States. It’s also bad for the U.S. tourism industry. Jobs and big money are on the line, for businesses large and small that depend on foreigners choosing America as a destination and spending big when they arrive.

International visitors tend to stay longer and spend more than American tourists, meaning they have outsized impact on the U.S. tourism economy. The realities of exchange rates mean the industry has to do things differently.

A strong dollar whacks the U.S. tour industry in two phases. First, people who are already here tighten up, like Grant Mason, visiting New York from Newcastle, England with his family. Their money did a lot more when they visited a few years ago.

“We certainly haven’t spent as much this time around as we did the last time we were in New York. We bought jeans and aftershave and perfume,” Mason remembered. “This time around we’ve bought very little. A couple of candles and a few toys for the kids.”

But at least they still came. The worry in the tourism industry is that a persistently strong dollar will bring about the more devastating second phase of impact, when exchange rates prevent people from choosing America as a destination in the first place.

Global travelers tend to book far ahead, often locking in prices ahead of time with package deals. Few will cancel a planned trip just because their currency gets weaker. But those who are currently making plans for next year may be swayed away from America, to a place with a more favorable exchange rate.

Those two decisions, where to go and how much to spend there, drive the strategies of tourism boosters.

As CEO of NYC & Company — the city’s official tourism marketer — Fred Dixon spends every day working to make sure the answers are “New York” and “lots.” In 2014, visitors spent $41 billion in New York. A chunk of that direct spending goes into the pockets of workers at hotels, restaurants and attractions. They multiply tourism’s impact when they spend their earnings.

“They’re going to buy groceries. They’re going to get their hair cut, supporting jobs outside of tourism,” Dixon said.

Of 56.5 million visitors to New York last year, about 1 in 5 came from abroad. But those foreign visitors accounted for about half of direct spending, so travel pros watch exchange rates closely. Dixon says the strength of the dollar is a pretty good predictor of visitation.

The city aims to be hedge its bets by appealing to a wide variety of countries. New York has benefited from a much more diverse mix of international visitors than a decade ago. China, Brazil and Australia have exploded, adding to business from stalwart countries like Canada and the U.K.

One would expect that a strong dollar and improved American economy would bring more American travelers to New York. But it’s a different challenge when the dollar rises, because that makes other countries cheaper for Americans. Dixon and his team have to convince them to choose New York over Paris or London. Key weapons are new cultural attractions and fashion.

“New York as a shopping trip, New York as your once a year check-in, got to get my new wardrobe for the spring season, is a message that resonates really strongly, particularly in the South and in the Southwest,” Dixon said. “Arts and culture and retail will be two areas that we will focus on.”

The impact of the strong dollar is felt at every level of the economy of a major tourist destination like New York. Longtime tour guide Larry Love leads tours on the iconic double decker buses run by Gray Line City Sightseeing New York. Asked what his favorite part of the job is before a recent run through Times Square and downtown, he went straight for the sale, with no shame.

“When the people give me a lot of money in this bag right here,” he said, shaking a paper bag marked “TIPS” that sits unmissably just inside the bus entrance. “This is what I like the most.”

There are recordings onboard in ten other languages. But those who speak English are in for Love’s salty mix of history, insider tips and loads of wisecracks. Frequent targets of his barbs are hot dog vendors and taxi drivers.

He plays up the New York accent and attitude and the tourists eat it up. It’s like a movie version of a New Yorker is right in front of them. Nearly all the riders leave a few dollars in the bag as they hop off.

The tour company says the unusually warm fall was great for business. But lately, Love has noticed the mix of passengers change a bit, with fewer riders from parts of Europe and Asia. But he can’t change exchange rates. All he can do is put on his best show and hope people come.

That’s the challenge for everyone in America’s tourism industry, making the best out of a situation affected by economic forces wholly out of their control. It all comes down to making sure enough people visit to keep the dollars flowing to shops, museums, hotels and into the brown paper bag where Larry Love collects his tips.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.