Tourism flourishes under weak dollar
By ROBERT TRIGAUX
Published December 22, 2004
When the Association of British Travel Agents met in Orlando last month, they tolerated the meetings about Florida vacation packages. What they really wanted to do was rocket to the nearest malls. To shop.
"There was an incredible demand for shopping," says an amused Bud Nocera, CEO of Visit Florida, the state's tourism marketing organization. "They wanted to go to the malls not only to do Christmas shopping but to use their British pounds because they could buy so much more here than back home."
The hottest purchase, by the way: Apple iPods.
Danah Heye, tourism marketing manager for Tampa's International Plaza upscale shopping mall, recently found herself surrounded by 120 German travel agents attending a trade show at the Sheraton Sand Key Resort. They peppered Heye about what stores were at the mall and were only briefly disturbed to hear International Plaza was not one of Florida's many outlet malls. When Heye reminded them of the favorable exchange rate of the euro, they flocked to the mall.
Favorite purchases? Jeans and tennis shoes.
"What we are seeing is a double-digit increase in international shoppers over last year," Heye says. Foreign shoppers, she adds, tend to spend three times more than locals do.
Shopping frenzy is just the tip of an iceberg when it comes to the dramatic drop in the value of the dollar. The dollar has lost more than 30 percent of its value against the euro, more than 20 percent against the Japanese yen over the past three years and recently dipped to new lows. The British pound is trading at nearly two to a dollar.
Standard & Poor's forecasts the dollar will continue to drop throughout 2005 when the value of one euro - which not long ago was worth less than a buck - will be worth $1.45.
The sharp drop in the dollar is the result of a broad spectrum of economic and political shifts, from the rapid rise of China, the war in Iraq and a global wariness of the re-elected Bush administration's international intentions, to the sky-high U.S. federal deficit and the growing strength of the euro and other alternative currencies to the dollar.
That's part of the currency backdrop in 2004. But let's focus here on some of the more practical effects of the starkly cheaper dollar:
Foreign tourists empowered by the high value of their currency are flocking to Florida, which has become a bargain for overseas vacationers and snowbirds. Tourism from Britain to Florida is at a four-year high and is forecast to hit 1.6-million visitors this year.
Snowbirds from Canada who struggled in recent years from the depressed value of the Canadian dollar, or "loonie," are enjoying a resurgence of spending power in the United States with the decline of the U.S. dollar.
The cheap price of U.S. goods for foreigners extends well beyond the malls. British buyers are snapping up Florida property because they can leverage the appreciation of Florida housing and the ongoing drop of the dollar.
For example, in 2003, the average house in Florida cost $160,000, or about 98,000 British pounds. This year, the same house has increased its value to $170,000, but because of the falling dollar, British buyers can buy it for just 89,000 pounds, according to the Scotsman, a Scottish newspaper. Now that's a bargain in any investor's book.
The cheaper dollar helps U.S. manufacturers and companies that export their products overseas. But a weak dollar makes it more expensive for this country to import goods. The result is an accelerating outflow of weaker dollars and a bigger trade imbalance.
The worry is that foreigners who traditionally invest heavily in such investments as U.S. Treasury securities will lose confidence in the dollar if its value continues to deteriorate. That's one reason the Federal Reserve has begun raising interest rates. Higher rates will increase the return on Treasury securities, presumably keeping foreign investors happy. But higher rates will also make it more expensive for people in this country, long accustomed to rock-bottom rates, to borrow money and continue their brisk pace of consumption.
It's a high-wire act that will be hard to maintain, especially as President Bush proceeds with a plan that might require heavy federal borrowing to overhaul parts of Social Security. Much more of the weak dollar story will play out in 2005.
For now, Florida is basking in an international tourism bonanza. The fear factor after the Sept. 11 attacks of three years ago is no longer an issue with international travelers to the United States, says Visit Florida's Nocera.
In 2004, the United States is on track to register the first increase in inbound travel since the terrorist attacks, according to the Travel Industry Association of America. And next year looks promising.
"What we are hearing is that next year - barring any unforeseen situation - should be one of the best summers for British and European visitors in many years," Nocera says.
At some point, the dollar will switch directions and start to regain its strength. Until then, Florida's tourist industry and retailers will bask in the glow of the discount greenback.
Robert Trigaux can be reached at trigaux@sptimes.com or 727 893-8405.