View from Manhattan: A surplus of bargain hunters

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THE EVIDENCE is still largely anecdotal. But to judge from the accents assembled outside a lower Manhattan American Express office this week, their owners jostling to see the currency quotes flickering up and down, a new breed of transatlantic tourist is descending on New York: the weekend shopper.

American travel officials play down the importance of near-record lows for the dollar, preferring to attribute the surge to President George Bush's 'personal invitation' in tourism campaigns in the UK and Japan. But everywhere in Manhattan one sees evidence of intercontinental bargain-hunting by prosperous Parisians, bourgeois Berliners, moneyed Milanese, and (relatively) lucred Londoners. With cheap air fares and a deep discount dollar, tourists no longer have to be able to afford Concorde to jump on a plane for some power-shopping at Bloomie's and Bergdorf's.

This week's European exchange rate crisis, combined with UK credit-card interest rates at 25-30 per cent, may cure some Britons at least of their travel bug. But for recession-weary Americans, the arrivals - 2.5 million from the UK alone last year - are part of a broader phenomenon the US Commerce Department is terming a 'travel surplus'.

With more foreigners vacationing here than there are Americans voyaging abroad - a historic reversal that began with the Gulf war - Washington is boasting that tourism is an important 'export' for the US, generating dollars 17bn in net inflows.

By this logic, tourism is America's second-largest export earner after commercial aircraft, and the surplus grew 58 per cent last year, while US trade overall went further into deficit. More important, dollars 10bn of that surplus is with Japan.

'Eat your heart out, Lee Iacocca,' gloats Darryl Hartley-Leonard, president of Hyatt Hotels and chairman of the Commerce Department's industry advisory board. Tourism, he points out, accounts for 6 per cent of the US gross domestic product and employs more than 6 million people - 'more than car making, banking and chemical production combined'.

While a booming tourist trade, growing at almost 7 per cent a year, may be creating tens of thousands of low-wage jobs, the irony of a 'travel surplus' is that it usually implies a relatively weak economy. With a dollar that has been battered by huge federal budget deficits and flagging international competitiveness, Americans simply cannot afford to travel overseas the way they used to.

And while Britons and other foreign travellers are doubtless enraptured by America's exciting cities and glorious natural beauty, surveys show that their two top reasons for choosing a US holiday are 'value for money' and 'budget accommodations'. Internal air fares, hotels and car rentals are all cheaper, as are most consumer products. 'The relative value of things here is so strikingly better, you can't ignore it,' says Margo Vignola, lodgings analyst with Salomon Brothers in New York.

Indeed, based on purchasing power alone, the US dollar is anywhere from a quarter to a third under-valued against the mark and the yen. Given that many currency traders believe the dollar, already down 20 per cent against the mark this year, still has some way to go, a 'travel surplus' is hardly the sort of economic indicator the Bush administration should be proud of.

This, however, is an election year, and the same strong mark that is responsible for the influx of Europeans should also allow them to buy more genuine US exports at home. Despite the slowdown in growth in Europe, US exports in the first half of the year held near record levels, at dollars 60.8bn.

'It's Americans with jobs at risk that are going to decide this election, not those who are angry about the price of a Big Mac in Rome,' as one Clinton campaign worker pointed out.

Despite dire predictions, tourism has hardly been affected in Florida, Louisiana or Hawaii, where local authorities launched campaigns almost immediately to remind foreigners that only small parts of the states were affected by their hurricanes. Ironically, in Miami the local convention bureau was obliged to pull its 'Shining bright after Hurricane Andrew' ad because most of its hotels and resorts are already heavily booked with relief workers.

This has not been the case, however, with Los Angeles, which has lost nearly 25 per cent of its tourism and dollars 2bn in business since the riots. The number of visitors from Japan alone has fallen almost 40 per cent - a disaster not helped by the fact that one of the Japanese airlines serving the city prepared an in-flight video giving tips about how to avoid getting mugged.

'Travellers can accept an earthquake in San Francisco and a hurricane in Florida because those events are beyond anyone's control,' says Hyatt's Mr Hartley-Leonard. 'It's problems that strike at the core of American cities - homelessness, dirty streets, crime, violence, a decaying infrastructure - that are not so easy to forgive.'

Cities 'are our industry's raw materials', he argues. So while President Bush's monetary policies may be helping America create tourist jobs, it is doing little to remedy longer-term threats to the industry, such as drive-by shootings, gang warfare and urban shanty towns.

The worst casualty of the 'travel surplus' is almost certainly American national pride. The days of the Ugly American in Europe may not be over, but his suite at the George V is now occupied by a Korean or even a Mexican. US newspapers this summer have been full of stories of mid-western families travelling to London, Paris or Rome and coming home outraged at paying dollars 46 for a couple of drinks at a cafe.

GIs still based in Germany are all too aware of the reversal of roles. Veterans of the 1950s remember nostalgically the days when a dollar bought four marks and even privates drove BMWs. Now a cup of coffee costs dollars 3.

And inevitably, 'Americans abroad will face the same jokes suffered by residents of other tourist-dependent, banana-republic economies', one columnist suggests. A colleague, based in Brussels but paid in dollars, was asked by his bank teller last week how he managed to live with such an unstable currency.

'What is this, South America?' he complained.

(Photograph omitted)