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The US Commerce Department and Ernst & Young reports that despite a flagging US economy, the devaluation of the US dollar, in particular its value to the Euro, British pound and Canadian dollar, is shoring up occupancy in American top-tier gateway markets and resort destination hotels. Foreign tourists are discovering it’s cheaper, or as expensive, for lavish trips over the pond or across the border than keeping to their traditional homeland vacation spots.

Commerce secretary Carlos Gutierrez’s March 26 report on international tourism states 2007 was an all-time record for international tourism, with more than 56 million foreign visitors, an increase of 14% more than ’06 estimates. Foreign travelers pumped $122 billion into the US economy on business and pleasure visits.

Michael Fishbin, national director of hospitality and leisure services for Ernst & Young in New York City, tells GlobeSt.com that from a “market perspective we’re seeing foreign travelers favoring urban, gateway (cities ) and prominent resort markets…(and) business travelers are combining business with pleasure by front-ending or back-ending their trips, adding days, and bringing their families along.”

The collapse in the dollar is also forcing the US traveler to stick to home, but not cancelling vacations, despite worsening US economic news and consumer economic fears rising as reflected in consumer confidence reports. “I’m a big believer in demographics…and psycho-graphics. The shear number of (the American) population, aging travelers with money and families with dual incomes” means they may not go overseas but will vacation in the states, Fishbin says. “There’s a preference for experiences and cultural activity and learning (about cities) that’s not going to go away. There’s a passion around our society for those experiences and while we may see some down-trading (to less expensive properties by US travelers) the demographics supporting this industry is just huge,” he says.

“The drop in the dollar is working the other way, making travel like Europe prohibitive” for many US consumers, Fishbin says. Hotels are not the only ones benefiting from the surge. “Again, the favorable exchange rates (are beneficial) not just from the retail and lodging perspective. It’s like the US is on sale, so to speak.” That’s also reflective in the dramatic increase of foreign investment in the hospitality sector, Fishbin tells GlobeSt.com. “We started to see more interest in the US from international investment funds, sovereign wealth funds and private equity funds,” Fishbin says.

While the underlying hospitality fundamentals remain relatively strong for potential recessionary times, the value of the hotel sector from a real estate perspective is dropping or growing slower than in previous years, though certainly not on the scale of the residential market collapse or the spreading of valuation declines to some commercial real estate sectors. Most major hoteliers are turning away from owning their asset, instead franchising or managing the property, curtailing their risk exposure in real estate values. Foreign investors are betting against that trend “These (foreign investors) see some opportunities over the near term and they don’t think (the market) is in major distress,” Fishbin says. “And they have different investment criteria (than US investors/lenders). They take a much longer term view” at owning the properties. But in some situations there are disconnects between buyers and sellers on values, he says.

With the housing crash, credit crunch and rising costs in food and energy, hospitality remains a sector the US Commerce Department insists is one of the ongoing positive economic engines still pumping on most cylinders. “The standards are still good but (growing) slower than we haven’t seen” for several cycles, Fishbin agrees. But are we in a recession, headed there, and won’t that change travel fundamentals? “God Knows. I don’t,” Fishbin tells GlobeSt.com

Gutierrez’s release points out that US travel and tourism is a $1.2 trillion industry that translates into a trade surplus of $17.8 billion for 2007, or a 144% increase over 2006. It’s the 19th consecutive year travel and tourism has been counted as a balance of trade surplus. The industry employs 8.5 million “which is more than other major industries such as construction, the business and financial service industries, agricultural and education,” according to the written statement.

The Office of Travel and Tourism Industries (OTTI) compiled the statistics released March 26 for the US Travel and Tourism Statistical System, which are used in the federal report. The bulk of foreign visitors came from Canada and Mexico, while overseas travelers totaled 23.9 million, a 10% increase more than 2006 but still 8% below the record levels of foreign visitors in 2000 before travel crumbled in the wake of Sept. 11, 2001.

Travelers by nation coming to the US , according to the commerce department, were: Canada, 17.7 million; Mexico, 15 million; United Kingdom, five million; Japan, 3.5 million; Germany, 1.5 million; France, 997,000; South Korea, 806,000; Australia, 670,000, and Italy, 634,000. In mid-afternoon trading March 28, the US dollar was worth 63 cents against the Euro, $1.01 against the Canadian dollar and 50 cents to the British pound.

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