Image: Chrissy Pike
Kathy Willens  /  AP
Chrissy Pike from Newfoundland, Canada, right, gathers with friends by the subway after shopping at Macy's Herald Square in New York. Shoppers from Europe and Asia who used to arrive in the U.S. with empty suitcases to hold their holiday shopping may be fewer and far between this year.
updated 11/26/2008 8:17:56 PM ET 2008-11-27T01:17:56

Overseas shoppers who once arrived in the U.S. with empty suitcases to take back their holiday loot may decide to stay home this year amid high-priced airline tickets, unfavorable exchange rates and lingering economic woes.

Consumers in the U.S. are already holding the line on spending, spooked by grim economic news, Wall Street's financial crisis and rising layoffs. As the economic malaise makes its way around the globe, it's less likely that tourists who gave U.S. retailers a boost in the past will decide to shop overseas again.

"In places like the U.K., France, Spain and Germany, people there are much more hesitant for the outlook in their own countries, so they're probably much less likely to take a vacation in the U.S.," said Adam Weissenberg, vice chairman of tourism, hospitality and leisure for consulting firm Deloitte & Touche USA. "The rest of the world was doing OK through the summer, but October was just dismal."

The stronger dollar may also have travelers thinking twice about traveling thousands of miles for the holidays. After sliding for years, the dollar is gaining strength, making purchases in the U.S. less of a bargain than before.

Kate Lyes, of Brisbane, Australia, said she aimed to spend a few hundred dollars while shopping in New York City for 10 days at Macy's and other stores, but that's still down from the $500 the 19-year-old originally planned to spend a few months ago.

"It's the exchange rate," she said.

Airline tickets have also become more expensive, leaving many travelers pondering whether to make the trip. Passenger traffic on the world's airlines during September fell 2.9 percent from a year ago, marking the first decline in five years, according to the International Air Transport Association.

"I don't think there will be the same level of travel as last year," Weissenberg said. "People will probably take vacations closer to home."

In previous years, international visitors have flocked to metropolitan areas like Chicago, Los Angeles and New York — looking to catch a glimpse of retail landmarks like Tiffany's and Macy's.

But this year, several retailers are already looking toward the holiday season with trepidation, expecting fewer tourists to walk through their doors.

Macy's Inc. Chief Financial Officer Karen Hoguet told analysts earlier this month that tourism slowed in the second half of the third quarter in New York, the location of its famous Herald Square store.

"I suspect it has to do with tourism, but I can't tell you that definitively," Hoguet said.

At FAO Schwarz's flagship location in Manhattan, "tourism has declined noticeably," said Ed Schmults, the company's chief executive. "The U.S. is still a relative bargain, but it's not the screaming deal it was in June and July."

As a way to jump-start sales to travelers, FAO Schwarz has duffel bags available that shoppers can use to take gifts back home with them. The company is also selling more low-priced, smaller items, which are easier to carry.

Lower international tourism may also hurt high-end jeweler Tiffany's. The company's chief financial officer, James Fernandez, said recently that a stronger dollar may hurt the company this holiday season, but Fernandez reiterated that international tourism is not a significant component of total sales. U.S. tourism is what matters more, Fernandez said.

Officials in New York, the top U.S. destination for foreign tourists, expect figures to show that more international visitors came this year than the 8.7 million who arrived in 2007. But while the number of visitors may be rising, the city's retailers may still suffer.

International tourists account for 30 percent of visitors to New York City each year but more than half of total spending among visitors — meaning if they cut back, it's a larger hit.

"The retail industry is going to be the first one hurt when people come in to visit New York City because people are going to be spending money on experiences, not material things," said Kimberly Spell, head of public affairs for NYC & Co., the city's tourism and marketing organization. "That will probably hold for a lot of other cities too."

Some retailers are using targeted marketing to attract international tourists who know they want to travel and are searching for bargains.

Minnesota's Mall of America has its own tourism department that works with tour operators and visitor bureaus to encourage visits, and some mall employees visit countries to promote additional traffic.

"We see this as being another strong holiday season for international visitors to Mall of America," said spokesman Dan Jasper.

At least 3 million international shoppers from places like Canada, Britain, Mexico, Japan and South Korea visit the Mall of America every year, he said, with about 1 million of them coming between Thanksgiving and New Year's. He said the fact that Minnesota has no sales tax on clothing and shoes gives travelers an extra incentive to spend.

George John, a marketing professor at the University of Minnesota's Carlson School of Management, said Mall of America has advertised itself as a destination for locals and international tourists, which should help protect a bit from economic weakness.

But John warned that some international tourists may decide to postpone their trips until the economy improves.

"I'm absolutely confident there's not a single person from Iceland shopping at Mall of America right now. I doubt being a destination will make you completely immune," John said.

Many outlet stores also specifically target tourists by teaming up with tour companies and offering brands that are popular with international shoppers.

Rachel Dowling of Dublin, Ireland, came with a group of her friends to shop at Woodbury Commons, an outlet mall about an hour outside New York City with over 220 stores. The center works closely with tour operators and attracts shoppers from all over the world, especially Europe, Asia and Latin America.

Dowling, 22, came to buy clothes, purses and shoes at stores including Timberland, Guess, Adidas, Gap and Tommy Hilfiger.

"We decided to come only about a month ago because everyone was talking about how good the prices were," said Dowling. "We've found lots of discounts so far, and we're only halfway done."

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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