— This is the script of CNBC’s financial news report for China’s CCTV on December 13, 2022.
Benefiting from the strong dollar, we’re seeing an influx of Americans traveling to Europe for vacations and spending big at local luxury stores.
Recent months have seen the euro gain ground against the dollar as the European Central Bank tightens its monetary policy, but at the moment, the dollar is still quite strong, while the euro is still well below the levels seen earlier this year against the dollar, with both close to parity.
When it comes to exchange rates, Angela Hughes, owner of Winter Garden, Trips and Ships Luxury Travel, believes that this is the best time for American travelers to begin traveling overseas, including to Europe and Japan. According to a travel consultant, international travel could also relieve U.S. consumers from domestic inflation, while the strength of the dollar can help offset price increases abroad.
This fall, the number of flights from the U.S. to Europe has approached pre-epidemic levels with a difference of just four percent, according to airline and travel data firm ForwardKeys. For instance, flights from the U.S. to Paris have returned to about 85 percent of their pre-epidemic levels in the six months to the end of October, and flights arriving in Milan are already above their pre-epidemic levels.
In addition to the increased number of flights, ForwardKeys’ vice president said that more people are choosing to travel in business and first class. According to the data, Americans are more likely to travel in business or first class to Europe this summer, up 18 percent compared to 2019. However, the number of people travelling in economy class has decreased by 8 percent.
According to David Mann, an economist associated with Mastercard, two interesting phenomena have emerged concerning the changing behavior of American consumers. Due to high inflation, people have become more frugal when it comes to necessities. On the other hand, people prefer spending money on experiences rather than things, which explains the preference for activities such as traveling and face-to-face shopping.
Chief economist for Asia-Pacific, Middle East and Africa at the Mastercard Economics Institute
“And what they’re doing with dealing with the cost of living is that on the necessities, they’re finding ways of compromising they of being a little bit more frugal.
These days they are spending on experiences on travel and on in person retail, going to the stores, maybe spending time and having the experience of getting out.
And we were still seeing that bias towards spending on experiences over things.”
Moreover, the surge of demand from U.S. consumers has helped European luxury companies during a period of low consumer confidence.
The consulting firm Bain estimates that Americans will spend 2.3 times more on luxury goods in Europe this year than they did in 2019. According to payments company Planet, spending by U.S. visitors in Europe increased by more than 40 percent in the week leading up to Black Friday. Additionally, U.S. visitors to European stores spent an average of €1,244 per transaction, which is significantly higher than the average of €500 spent by Americans in 2019.