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Weak dollar lures bargain-hungry Europeans

London graduate student Paul Meghoma has made holiday shopping trips to New York before, but he doesn't recall ever having spent money with such abandon.
/ Source: Reuters

London graduate student Paul Meghoma has made holiday shopping trips to New York before, but he doesn't recall ever having spent money with such abandon.

“I'm spending more than ever, but it's costing me less,” he said as he checked out Calvin Klein ties at Macy's giant flagship store in Manhattan, buying several.

The British tourist figured that with his U.K. pound worth nearly $2 “it's like paying half price for the same designer brands.”

The same math is drawing tourists to the United States in record numbers to spend money at American malls and department stores as their pounds and euros travel farther than usual — and that means more holiday cheer for U.S. retailers and tourism companies.

The decline of the dollar has driven the British pound up more than 13 percent against the dollar this year, with one pound now fetching more than $1.95. The euro is more than 10 percent stronger. And economists expect the dollar's downtrend to continue well into next year.

The hyper-competitive U.S. retailing environment also adds to the allure for Europeans accustomed to a more staid shopping world.

“For West Europeans with time and disposable income, U.S. prices are really bargain basement now,” said Henry Harteveldt, a travel analyst at Forrester Research in San Francisco.

For shoppers of all budgets, the savings are significant. An Apple iPod, for instance, costs $249 in New York, or about 128 pounds sterling. In London, an iPod costs 189 pounds, or $370 at current exchange rates.

Meghoma said brand-name ties that cost at least 40 pounds ($78) in London are available for $39 in Macy's and Bloomingdale's in New York.

Tour operators are reporting rising sales of trips from Europe to the United States, with online travel agencies seeing a particularly sharp increase, said Harteveldt.

In 2006, the number of foreign visitors is expected to rise 4 percent to 51.4 million, according to the Office of Tourism Industries at the Commerce Department.

And now that they're getting more bang for their buck, many visitors in the holiday season are making straight for the stores — sometimes literally by the busload.

Bus operator Gray Line New York said it planned to run the first of 10 buses to the Woodbury Common Premium Outlets mall before midnight in Central Valley, N.Y. at 10:45 p.m. on Thanksgiving night. But lines at the Port Authority terminal in Manhattan were so long that the first bus had to leave nearly an hour early so every shopper could make the 50-mile trip on time.

Sometimes the European visitors come straight from the airport “with just the clothes on their back,” said spokeswoman Michele Rothstein of Chelsea Property Group. “They buy luggage there. They come ready.”

Chelsea, a unit of Simon Property Group, which manages Woodbury Common outlet mall, attracts thousands of Irish and English visitors a week at its suburban New York and Boston centers. The outlet stores offer high-end brand names like Gucci and Coach at discounted prices.

Back in Europe, Luciana Bodnar, a graduate student from Paris, said she and her husband will celebrate the new year in New York this year because tickets seemed especially cheap.

“Only later I realized the euro is getting stronger and stronger, and now I'm checking it every day,” she said in an interview. “This means shopping galore for me.”

Europeans are “oftentimes paying for their trips through their shopping discounts,” by saving up to 30 percent on luxury products and brand names, said Robert Wallstrom, general manager of Saks Fifth Avenue, one of New York's prime shopping destinations. Wallstrom figures Europeans save up to 30 percent on luxury-brand purchases shopping in the city.

Analysts say the weaker dollar is especially good news for the bottom lines of high-end retailers, notably stores like Saks and Tiffany where New York sales account for a large part of total turnover.

“The retailers that would do best will be the luxury-goods retailers in New York,” said Mark Montagna, retail and consumer analyst at CL King & Associates. “Who's coming here to get a bargain at The Gap? You want to go to Tiffany and get that $1,000 item for $700 or $800.”

Hotels in New York also report hearing a lot more French, Spanish and Irish-inflected English this year, and Forrester's Harteveldt said the Europeans are “trading up and taking more expensive rooms with better views.”

New York's Waldorf-Astoria said it has recorded a 17 percent increase in foreign visitors this year, most of them British.

The falling dollar is a downer, though, for Americans who wish to travel and spend, since it makes overseas purchases more expensive. Harteveldt said airlines fear prolonged dollar weakness will keep Americans home next year.

According to research firm Euromonitor, only Germans and Britons travel abroad more than Americans, and Western Europe still dominates the $668 billion global tourism industry.

But Amy Ziff, editor at large for online travel agency Travelocity, said too many Americans have been bitten by the travel bug to stop altogether.

Instead, she said, Americans are likely to start choosing to take more trips to Latin America, Eastern Europe and Asia, where the dollar goes further.

“Paris is always going to be near the top of the list, but it's more interesting to see what slice of the pie is getting bigger, and that's places like Buenos Aires, Santiago, Dubrovnik in Croatia,” she said. “People are price-sensitive, but they also want to travel in increasingly large numbers.”