Europe stung by US tourist slump

Woody Allen can make Americans laugh, but can he make them want to visit France?

Stung by an alarming drop in the number of US tourists coming here, the French tourist office has hired the comic filmmaker to plug its country's charms in a new video.

"Recently there has been a lot of controversy between the two countries, and I would hope that now they can put all that behind them," Mr. Allen says in the promotional clip "Let's Fall in Love Again."

"And I will not have to refer to my French fried potatoes as freedom fries and I will not have to freedom kiss my wife when all I want to do is French kiss her."

French tourism officials say they do not believe political friction between Washington and Paris has much to do with the shortage of American tourists on the Champs Elysées these days. But they are clearly worried by the 19.8 percent falloff in American visitors they have measured so far this year, compared with the first quarter of 2002.

"The boycott (of France and its products) is a minor phenomenon," says Marie Plaisait, spokeswoman for the French tourism ministry. "The things about France that attract Americans still attract them."

But the French tourism office's own research has found that 40 percent of Americans who had planned a trip to Paris this year have canceled or postponed their vacation. And two thirds of them did so because of "fear of how they would be welcomed" in the wake of the war in Iraq, which the French public overwhelmingly opposed.

France, however, is not the only European country seeing fewer American tourists. Last year, when American visitor numbers dropped by 15 percent this side of the English Channel, they fell even further in Britain.

This year, national tourist boards across the continent are predicting a fall in US visitors of between 10 and 12 percent compared with 2002.

That hurts, when you think that visiting Americans - the biggest spenders of all foreign tourists - typically spend more than $20 billion a year in Europe, according to the European Travel Commission, an industry group that promotes tourism.

Analysts suggest a number of explanations for the slump. The aftereffects of September 11th and the fear of international terrorism, are clearly high on the list. Worries about SARS are also curbing Americans' appetite for overseas travel - even to unaffected regions of the world - due to the fear of contracting the virus on airplanes.

"We are entering a stage when there are so many risks associated with travel, and Americans seem to be more affected than others," says Lisa Davies, a European Travel Commission official.

Compounding those risks is the rising cost of a vacation in one of the 12 European nations that use the euro as their currency. The US dollar has fallen nearly 30 percent against the euro since this time last year. That makes everything 30 percent more expensive for US tourists - an especially significant consideration at a time of falling stock markets and economic slowdown.

The strong euro is even more of a problem for many European businesses, which cannot cancel or postpone their US competition the way American tourists can their trips. European exports are now one-third more expensive than they were, and US goods are that much cheaper by comparison.

The euro's climb "has given a 30 percent competitive edge to my American competitors," says Alexandre Saubot, managing director of Pinguely-Haulotte, a large French manufacturer of booms and other aerial work platforms. While American companies selling in Europe can choose to grab more market share or simply boost their profit margins by discounting their prices, Mr. Saubot has no option but to cut costs.

"You can shave 5 percent or 10 percent from your costs, but 30 percent is hard to absorb," he says. "If the euro rises another 30 percent over the next year, we will be in a very difficult position."

Currency analysts do not expect that to happen. The US dollar had been heavily overvalued for several years, they say, and is now finding a more reasonable level against the euro and other international currencies.

After a long period of infatuation with high growth rates and a rising stock market in America, investors are now paying closer attention to the US trade deficit and other structural problems with the US economy, says Mikael Schubert, a currency analyst with Commerzbank in Frankfurt.

"Accounting scandals at companies like Enron and WorldCom made the markets realize that the new economy was not all that they had thought it might be," Mr. Schubert says. "They reassessed the whole situation."

Not that investors are wildly excited about the prospects for economic growth in Europe. Last week, the European Central Bank, cutting interest rates to a historically low 2 percent, revised its forecast of growth in the euro zone downward to just 0.7 percent for this year.

"The current situation is a result of a dollar negative attitude, not of any inherent strength in the euro itself," says Schubert. "International investors see the euro area as a one-eyed man in the kingdom of the blind."