- Retailers and malls hope to get a lift starting Monday, as many international travelers are able to visit and shop in the U.S. again.
- Global visitors fueled more than $43.4 billion of shopping in 2019 — or 27% of the total shopping driven by travel and tourism, according to the International Trade Administration.
- Yet retailers, tourism groups and industry watchers warn it will take time for pre-pandemic levels of shopping to return.
As the holiday shopping season picks up, retailers across the country hope to get a lift from another wave of spenders: international tourists who can visit the U.S. once again
Starting Monday, the Biden administration will allow visitors from abroad into the country again. Most foreign travelers from more than 30 countries, including the U.K. and Brazil, have been restricted since early 2020, as Covid-19 cases rose globally. Visitors must be fully vaccinated against Covid and have a negative Covid test within three days before departure. Exemptions apply to travelers under the age of 18, if they have medical reasons preventing them from getting a vaccine, or are traveling from one of 50 countries with low vaccine availability.
For retailers, the policy is a much-awaited change that may help them fill up stores and ring up bigger sales again. At stake are billions of dollars that tourists spend on not only souvenirs, but luxury handbags, high-end makeup, top-shelf liquor and other items they often can't find at home. Global visitors fueled more than $43.4 billion of shopping in 2019 — or 27% of the total shopping driven by travel and tourism, according to the International Trade Administration.
Yet retail experts and companies say it will take time for tourists to return to the U.S. and spend at post-pandemic levels. Airlines still have fewer flights. Other countries, including China, tightly restrict outbound travel. And pandemic-related logistics, from long lines at the airport to show proof at vaccination to Covid test when returning home, could delay travelers from booking a trip.
"Airlines will tell you that they are seeing a surge in booking. What they don't quantify is when. Hotels will tell you is they're seeing an uptick in bookings. What they won't tell you is when," said Daniel Binder, a partner for Columbus Consulting who focuses on travel retail. "The ban will lift, and it will take time."
Binder saw the spending power of international tourists — especially Chinese tourists — up close as a longtime executive at DFS, a luxury goods travel retailer that's owned by LVMH. He said he also saw the many months it took for global tourists to flock back and spend freely after other challenging periods, including the 9/11 terrorism attacks and the SARS outbreak.
Still, National Retail Federation CEO Matt Shay said there is a feeling of optimism as the ban lifts. He said that as Americans feel comfortable booking trips, dining out and having more active lives, they are also shopping. As international tourists visit, that will "give a jolt to the retail side," too, he said.
"The return to the service and the experience economy is going to be positive and beneficial for retail and it's going to be enhanced furthermore by these international visitors returning to the U.S.," he said Wednesday on a call with reporters.
'Shot in the arm' for New York City
International shoppers will be a key ingredient needed for New York City's recovery. During a typical year, visitors from other countries spend an estimated $4.75 billion on shopping, according to NYC & Company, the city's tourism board.
Shopping is the most popular activity for people visiting the city from other countries — with 88% of international visitors saying they participate, according to a 2018 survey by the Department of Commerce. That's compared to 86% who participate in sightseeing, 54% who go to art galleries and museums and 29% who experience fine dining.
In contrast, less than 30% of tourists from other parts of the U.S. shop when they are in New York City.
"It's a pivotal milestone in our recovery, for sure," said Chris Heywood, executive vice president of global communications at NYC & Company. "Welcoming back the international traveler is exactly the shot in the arm that New York City needs right now."
In the coming days, Heywood said the tourism group will unveil a project with Macy's, Bloomingdale's, Saks Fifth Avenue and other retailers to incentivize visitors to return to their stores. Over the next few months, he said the group plans to spend $6 million across the globe on advertising about New York City. He said that money will be concentrated in countries that have loosened their policies in a way that makes it easier for their citizens to leave and return home. These include South Korea, Canada, Mexico, Brazil, Germany, France and Italy. Places where restrictions are till very tight, such as China, will not be part of the advertising campaign.
Heywood said New York City benefits from having many shopping districts that are themselves tourist destinations — such as Fifth Avenue, Times Square and Hudson Yards — along with attractions like Broadway shows and art museums.
"This is a chance to actually get back to this notion of that shopping experience and having the bragging rights to say 'I bought that on Fifth Avenue' or 'I bought that in New York,'" he said. "That's something people have not been able to have."
Still, he said it will take years to build back up the city's tourism and shopping revenue. The group expects about 2.8 million international visitors to come to New York City this year, compared with 13.5 million international visitors in 2019. Next year, it expects international visitors to triple to about 8.5 million and by 2024, it expects international tourism to roughly match pre-pandemic levels.
"We're hoping to accelerate that timeline as much as possible," he said.
'We don't see tremendous movement'
Some retailers said they don't expect the lifted travel restrictions to result in an immediate jump in sales. For many companies, especially those outside of the luxury space, the market doesn't make up a significant chunk of their businesses. Department store chain Macy's, for example, said that international tourists accounted for just about 4% of sales in 2019.
Capri Holdings, which owns Michael Kors and Jimmy Choo, believes that some international tourists will book trips to the U.S. in the coming weeks. But CEO John Idol noted on an earnings conference call on Wednesday that there was only a minor return among international tourists into Europe, after travel restrictions were lifted. And there has been no return into Japan nor Korea, he said.
"In our forecast, we don't see tremendous movement changing our trajectory at least in next fiscal year," Idol said.
For a company like Tiffany, however, it could be worth the extra effort to try to court international visitors back to its U.S. stores. The jewelry chain, now owned by LVMH, typically sees about 12% of sales domestically coming from foreign tourists.
This holiday season, Tiffany has opened a pop-up shop in the West Village neighborhood of Manhattan, which pays homage to the legendary Tiffany designer Jean Schlumberger. The space, which features a number of Instagram friendly backdrops and activities for visitors such as painting, is open to the public from Monday until Jan. 8.
It's the mall operators — some of the most challenged by stay-at-home trends in 2020 and consumers shifting into e-commerce — that say they expect to see a boon to traffic as foreigners return.
"We still think that there's another leg up if we get the international tourist that we haven't seen for a couple — two, three — years," Simon Property Group CEO David Simon told analysts on an earnings conference call held Monday.
Simon's malls include The Forum Shops at Caesars Palace in Las Vegas, The Galleria mall in Houston, as well as a number of premium outlet centers.
Over in New Jersey, the American Dream megamall is antsy for foreigners to visit. A portion of the 3 million-square-foot development first opened to the public in October 2019. But it was shut down shortly after due to pandemic restrictions. When it had first kicked open American Dream's doors in the fall of 2019, operator Triple Five Group told CNBC the megamall would draw 40 million visitors annually, many of them foreigners. It has likely only since seen a sliver of that.
American Dream is ramping up its efforts to court tourists to New Jersey's Meadowlands in preparation for Monday. The megamall has a team entirely dedicated to tourism that is corresponding with travel agencies and helping visitors book trips to the development.
"American Dream was always designed to be a top global tourism destination," said Jill Renslow, executive vice president of marketing at Triple Five. "We're also working with New Jersey ... making sure we're showcasing all the things that New Jersey has to offer."
The fact that sales of clothing and footwear in New Jersey are generally tax exempt should be another appealing factor for foreign visitors to head to the state, she said.
Just last month, the first round of luxury retailers — including Saks Fifth Avenue, Hermes and Dolce & Gabbana — opened up at American Dream. These high-end shops also have their own wing within the megamall, which includes a separate escalator entrance for buses that are there to transport tourists and their shopping bags.
Jeweler David Yurman has laid the groundwork during the pandemic to grow its international sales. It has 45 stores in the U.S. and a handful in Canada, but has partnerships with jewelry and department stores in other parts of the globe.
Over the past year and a half, it has launched dedicated websites in other countries and kickstarted initiatives to woo more Chinese customers, David Yurman head of marketing Lee Tucker said. It started to sell a limited collection through social media and messaging app, WeChat, he said.
Tucker said that salespeople at the jewelers' stores know how to speak numerous languages, including Mandarin, Arabic and Farsi, so they can welcome tourists and make them feel at home.
Starting this month, a double-decker bus wrapped in the company's advertisement is driving to destinations like Rodeo Drive and Newport Beach, where international tourists may see it and get inspired to shop.
"We're holding our breath to understand how international tourists are going to come back to our cities and which groups are going to travel here first," he said.