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Gotham’s Tourism Boom

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Gotham’s Tourism Boom

International visitors have driven the city’s economic recovery—but will they keep coming? Autumn 2014
New York
Economy, finance, and budgets

Foreigners make up only 21 percent of the city’s tourists, but they spend more than American visitors.

Stand outside the Abercrombie & Fitch clothing store on Fifth Avenue on an August afternoon, and you’ll see a cross-section of the world. Two dozen people wait to get in to buy the brand’s flannel shirts and sweatpants. Daniela, 36, works at a veterinary practice in Germany. She’s on her second visit to New York. The first was in 2008, when she came to see Hillary Clinton’s election to the presidency. “I booked a flight before Obama,” she says. This time around, Daniela is headed to the Brooklyn Botanic Garden. Nearby, Tristan, Coline, and Hugo, three siblings from Marseille, France, are in America for the first time. The trip was a “surprise gift” from their parents, who loved New York when they visited. “Today is shopping day,” says Coline. “We heard Fifth Avenue is like the Champs-Élysées.” On subsequent days, they plan to take in the American Museum of Natural History, the Statue of Liberty, Harlem, and the Brooklyn Bridge. Also in line are Maria, from Italy, and her preteen daughter, toting shopping bags from Guess and Michael Kors. “I like very much New York,” says Maria, who has come here “100 times for business. This trip is for shopping.” Behind Maria and her daughter stand Five Zeng and Jason Wu, both 16, from Guangdong, China. They’re on a 15-day English-learners’ trip across the United States. “I want to buy an iPad,” Zeng tells me.

Zeng and the others make up a crucial part of New York’s post-2008 economy. Growth in foreign tourism over the past half-decade has propelled the city’s economic recovery, allowing it to regain the jobs it lost during the recession three years before the nation managed the same feat. Tourism’s robust growth, though, poses infrastructural and economic challenges. And New York must beware of focusing so much on tourism that it loses sight of what most of the visitors are actually coming to see—not a concrete Disneyworld but a flourishing, unique, well-run modern metropolis.

As everyone knows, the American economy collapsed after the 2008 financial crisis. People stopped buying houses, so construction jobs vaporized. But the crisis did deeper harm to consumer demand. When people couldn’t keep pulling cash out of their homes to pay credit-card bills, they stopped spending money on everything from cars to clothes. Developers then stopped building offices and malls. Nationwide, the construction and retail industries still haven’t recovered the 30 percent and 9 percent of jobs that they respectively lost; it took the leisure and hospitality sector nearly four years to replace the hotel, restaurant, and other jobs that it shed.

In most American cities, the demand for this type of stuff is primarily local: real-estate developers and restaurateurs can’t make up for sinking demand by exporting their goods and services to foreigners. New York is different—it can “export” Abercrombie jeans, H&M skirts, and Uniqlo sweaters to foreigners, along with Daniel Boulud meals and Marriott hotel rooms, when those foreigners come to the city as tourists. Over the past half-decade, the city replaced slower-growing domestic demand with foreign demand of this kind. Domestic travel overall to New York has grown 14 percent since 2008; international travel to the city is up 20 percent.

The rise in foreign visitors is even more striking when one considers that demand from Western Europe fell after 2008, as consumers struggled under massive household debt. But even as the American and Western middle classes slogged through a difficult decade, newly well-off people from parts of the world that avoided the worst of the economic upheaval rushed to New York to spend money. Between 2008 and 2013, New York lost 500,000 British, Irish, and Spanish visitors, but annual visitors from China have nearly quadrupled over that period, to 646,000, and the number of Brazilians has nearly tripled, to 895,000.

The world’s new urban upper-middle class prefers New York to other American cities. People flocking to Gotham constitute nearly a third of foreigners coming to America, nearly three times the share of runners-up Miami and Los Angeles. This preference seems impervious to economic fluctuations. Since 2000, global tourism to New York is up by more than two-thirds, exceeding the 46 percent hike that the city has seen in domestic visitors. New York is the sixth top city globally for the world’s itinerant classes, according to a MasterCard analysis—the only American city to make the top 20. Global insatiability for New York’s museums, entertainment, parks, and the Statue of Liberty, among other attractions, means that the city has done better than, say, Las Vegas, which, partly because it depends more on domestic tourists, only recovered its 2007 visitor volume last year.

Foreigners make up only 21 percent of New York’s tourists, but they have an outsize impact on the city’s economy because they part with more of their money. Last year, New York’s 11.4 million foreign visitors accounted for nearly half of tourist spending, shelling out $18.6 billion. Foreign visitors spend more in New York than they do in any other place in the world, save London, MasterCard found. Foreign demand pushed New York’s average hotel-room rate to $270 nightly this past June, according to the STR travel-research firm, nearly twice as high as the average for America’s top 25 cities and nearly three times as high as the average in Orlando, another booming tourist town, but one that, like Vegas, relies on Americans. Despite the nosebleed prices, city hotels are at nearly 90 percent occupancy—fuller than hotels anywhere else in the nation. Last year, world tourists made up 23 percent of city theatergoers, the highest figure ever recorded, the Broadway League notes. Foreigners constitute 18.4 percent of operagoers, up from 15.2 percent in 2008. Go to the Museum of Modern Art before it opens, and you’ll see young foreigners lining up. In the past two years, to meet demand, the Metropolitan Museum and MoMA have dispensed with their tradition of closing one day a week.

The jet-lagged people blocking sidewalk intersections with their battered wheelie bags have driven New York’s recent job growth. It took until earlier this year for America to replace the 8.8 million private-sector jobs it lost between 2008 and 2010. National employment is only 4 percent above what it was in 2000, nearly a decade and a half ago. The city is way ahead on both counts. New York recovered its lost 187,000 private jobs by 2011, and it now has 11 percent more jobs than in 2000. This growth hasn’t taken place on Wall Street—the financial industry is still missing 28,800, or 6.5 percent, of its pre-2008 jobs—but most robustly in industries that serve tourists. The hotel and restaurant industry has added 72,200 jobs—nearly 30 percent above the precrisis total. As the nation’s retailers struggle, New York’s retailers have expanded by 58,300 jobs, a nearly 20 percent increase. The city’s arts, entertainment, and recreation sectors have added 8,500 new jobs, about 13 percent more than precrisis. Even the city’s construction industry has avoided the deep losses that hit the sector elsewhere, thanks in part to all the hotels springing up in midtown Manhattan.

New York’s tourism boom isn’t happening because of theme parks or gambling emporia. World travelers visit New York because it’s a functional, thriving city, whether you want to sit in Central Park, see Julie Taymor’s version of Shakespeare in Brooklyn, or enjoy brunch at Red Rooster in Harlem. This urban flourishing is due to the city’s success in cutting crime, nodding (albeit haltingly) toward fiscal responsibility, and rebounding from 9/11.

Crime in New York has dropped 83 percent since 1990—a year when Gotham had fewer than half the global visitors it will see this year. Cristyne Nicholas, a PR pro who ran the Giuliani administration’s communications office in the mid-1990s before heading up the city’s tourism bureau for nearly a decade, remembers how crime scared tourists away. The 1990 murder of 22-year-old Bryan Watkins—visiting from Utah with his family—in a midtown subway station “sent shockwaves to tourists around the world,” she recalls. Watkins’s death followed on the heels of the Central Park jogger case in 1989—when 28-year-old Trisha Meili, an Upper East Side banker, was raped and beaten as she ran along the reservoir one night. “These were horrific crimes that really gave people pause. New York City wasn’t in a position to say with any authority that it was safe for families.” When Giuliani touted new crime stats, local reporters “would roll their eyes,” she tells me. But the press conferences weren’t just for the local media: they were also “for the folks in Spain,” she explains. This was “a tourism initiative.”

Tourism experts concur. Mike Stengel spent 20 years managing Marriott hotels in New York before relocating to take a promotion at the company in 2012. When he arrived in New York in 1990, the Marriott Marquis, the company’s Times Square flagship, had been open for half a decade. Back then, Stengel remembers, “we would never tell customers that the Marquis was in Times Square. We would say that it was in midtown Manhattan.” Another selling point: “Telling customers you didn’t have to go outside” but instead could eat, drink, meet clients, and enjoy the balcony views inside. Today, Stengel notes, “everyone’s saying that they’re in Times Square, even if they’re not.”

The city’s fiscal policy also nurtured global tourism. One of Giuliani’s first mayoral actions was to cut New York’s hotel-occupancy tax from 6 percent to 5 percent (former mayor David Dinkins had hiked the levy in 1990), signaling to tour-group sellers and convention organizers that the city wanted to welcome visitors, says Nicholas. The tax cut produced a revenue boost for the city, with annual hotel-tax collections nearly doubling by the conclusion of Giuliani’s two terms.

As the millennium dawned, New York was back; the dazzling New Year’s Eve party in Times Square in 1999 symbolized the city’s remarkable resurgence. Twenty-one months later came 9/11. The terror attacks had the potential to kill off New York’s tourism, with people staying away out of fear, or other motivations—Japanese tourists, for instance, “culturally thought it would be disrespectful to come before a year” had passed, says Nicholas. Between 2000 and 2002, even as domestic tourism held steady in the city, international tourism shrank 25 percent. New York’s tourism office recruited global stars, including Yankee Hideki Matsui, to make ads declaring that “New York City was open for business,” Nicholas recalls. Still, it took until 2005 for global visitor numbers to recover.

International travelers, unlike most domestic travelers since 9/11, eat real meals on their flights. Flying into New York and then back home again, they create jobs for hundreds of Queens residents, most of them immigrants and minorities, who feed them. Long-haul airline catering is a logistics industry that combines international gourmet cooking with post-9/11 security measures and FedEx-style precision delivery. “This is an on-time business,” says Olaf Straube, who runs the Flying Food Servair catering group’s 106,000-square-foot kitchen at JFK airport. “The last thing we want to do is make the plane late.” Flying Food makes 90 percent of its meals on site, less than 24 hours before people eat them, 39,000 feet up. During peak summer season, the company makes 22,000 meals a day for hungry people on 53 flights, on airlines from Air France to Qatar Airways.

Surging tourist demand has allowed Flying Food to increase its year-round workforce to 500, up from 380 half a decade ago. The workers operate on a modern-day assembly line—accepting and loading raw ingredients, keeping halal food separate from regular food, grilling up filet mignon for business travelers, flash-freezing the food, loading it onto airline trolleys, and getting the trolleys onto the planes, fast. Workers must be able to unload and load a 777 with 342 meals within 35 minutes. Feeding the world comes with unique challenges: in addition to being required to have a third-party security firm check its trolleys before they go up in the air, Flying Food must incinerate the trash that comes off foreign flights, since it cannot enter the United States. Meantime, the company also has to make decent food—working off a stack of airline-specific menus that change monthly.

Tourist demand grows every year, observes Straube. “Europeans are coming over,” he says. “They buy everything.” Big growth is coming from Asia, too. Eva Air, from Taipei, is increasing from five flights a week to daily. Flying Food’s newest customer is China Southern, an airline that has started flying four times a week to Guangzhou and wants to go daily within six months.

Thanks to its food-prep work, Flying Food offers low-skill job opportunities for immigrants. “You don’t need to speak English to plate food,” says Straube. The hot kitchen is filled with Chinese men frying up egg rolls for Chinese high-fliers and Hispanic women carefully plating cheese wedges and fruit compote for the Swiss. Sixty-five percent of the company’s jobs are in the food-assembly area, where unionized workers can start working at $19,000 to $22,000 yearly. “Our jobs provide people the first rung on the ladder of development,” says Milt Liu, Flying Food’s Chicago-based president. But because of the industry’s logistical complexity and growth, opportunities abound for advancement. A driver may start at $22,000 but move up to $40,000 with overtime, and 50 or so administrative jobs pay more. “We normally promote from the inside. This is a unique industry. You need a lot of operational knowledge,” Straube explains. Says Liu, “many $9 to $10 jobs become salaried positions of $50,000 to $100,000.”

Executive chef Ismael Barreto exemplifies the upward mobility. He started his career with an apprenticeship in airline catering, worked in hotels for a time, and returned to feeding flying customers three years ago, getting hired by Flying Food and quickly winning his promotion. A Queens native who now lives on Long Island, Barreto starts his workday at 6 AM, when he “walks through . . . to look at anything missing.” He acknowledges the challenge of overseeing the preparation of food for exacting global customers, ranging from Swiss CEOs to teenage Chinese backpackers. “They expect the same exact flavorings, the same spices. They know their food,” he says.

Thanks to global visitors, New York’s tourist industry offers solid middle-class jobs even in low-skill positions that elsewhere get paid minimum wage or a little more. Mike Ryder, 37, “works the door” at the Upper West Side’s high-end Empire Hotel, which caters largely to foreign tourists. He earns $32,000, plus solid benefits, and that’s before tips, which net the average bellhop tens of thousands more. His income made it possible for him to buy a condo in Williamsburg; he feels secure knowing that his wife and son have health insurance. “Everything that I have is because of my union job,” says Ryder.

Even as other private-sector unions have struggled, the Hotel Trades Council, which represents Ryder, has inked lucrative agreements, in part because New York’s hotels can pass higher costs onto deep-pocketed customers. Before benefits, the union’s 28,590 members earn an average $52,042 yearly. The union has added 4,400 new members over the last decade. Hotel housekeepers are the biggest part of this workforce; 42 percent of union members speak English as a second language. “It used to be Polish [and] Greek,” says Josh Gold, union political director. “Now they’re Caribbean, African, Asian. It’s the trend line of people coming to the city itself.”

The hotel industry, like airline catering, enables people to work their way up. The Marriott’s Stengel, now 57, “grew up in the lovely city of Camden, New Jersey,” and started at the Marriott more than three decades ago, washing dishes in a mid-Atlantic hotel at night. He worked his way up, doing every job, from busboy to waiter to dish-room manager to room-service manager, and moving around “like I was in the army,” until he arrived in New York in 1990, again working his way up, this time from running food and beverage at the Marriott Marquis to running the Marquis itself and eventually, managing all the Marriotts in the city. “It was quite exciting to see the massive changes over 20 years,” he notes. Back in the early 1990s, he wouldn’t ride the subway; by last year, when he left to take another job with the firm outside New York, he thought nothing of “riding the subway at 1 AM.” Managing a big hotel—or several—is a good six-figure job. The industry still promotes from within, encouraging workers to “zig-zag” as he did until they “learn the entire business” and “find a part of the business you really like,” whether horticulture or engineering or security.

Stengel echoes Ryder: workers can make good money without moving into management. “I don’t remember ever hiring a bellhop or a door-person,” he tells me, thanks to turnover of less than 5 percent. “There are great wages, great benefits in New York City.” He says, too, that New York managers take for granted a high-quality workforce. “Some markets, you can hardly find anyone to cook,” he says. In New York, workers are skilled and industrious and speak dozens of languages, giving foreigners a measure of comfort they won’t get anywhere else in America. “No other market has the same diversity of people,” says Stengel.

The tourism industry also provides opportunities for New York’s entrepreneurs. Chris Wogas, who manages New York’s Bike and Roll bike-rental and bike-tours company, says that his employers started up their franchise of the multicity firm in New York seven years ago. It quickly “took off,” going from one location and 150 bikes to 11 locations and 2,000 bikes now. “We’re starting our fifth year” in Central Park, he says. The company has 12 full-time staff and eight to 10 part-timers; skilled workers make $35,000 to $55,000 annually. Bike and Roll also hires about 150 seasonal workers, with some high school and college kids coming back for several years.

Bike and Roll thrives on foreign tourism. Foreigners make up “well above half” of customers, Wogas says, and the number “could be as high as 80 percent.” The reason is that cycling in much of the rest of the world “is just part of how they’re raised.” The stigma among American visitors is that “you can’t ride a bike in New York,” he adds, but many foreigners “have no problem getting out on the street.”

City policies have helped get more tourists on bicycles. Central Park is now reserved solely for walkers and bicyclists for more hours of the day, and sets aside more street space for bikers and walkers at any hour, than in the past. The West Side Greenway, too, is complete, so people can bike from midtown to downtown and on to Brooklyn. It’s “both transportation and leisure,” Wogas explains—“the sheer scale” of the park and the city means that people can’t really see it on foot. Wogas expects business to grow as New York makes the streets safer from dangerous traffic through its “Vision Zero” initiative. (See “New York’s Next Public Safety Revolution,” Spring 2014.)

Can tourism keep expanding in the city? For it to happen, New York must beef up its infrastructure. The rising number of long-haul flights is straining capacity at the airports. Straube of Flying Food notes that the only time airlines can add flights is in the middle of the day; coveted early-morning and evening slots are gone. “The planes line up on the tarmac from 5 PM to 10 PM,” he says. As a sweltering border guard told me in a packed immigrations hall at JFK, the terminal “was built for one flight an hour. Now we have three.” Easing the crunch will require new runways and bigger terminals, says Stephen Sigmund, executive director of the Global Gateway Alliance, an advocacy group for improved airports—but greater efficiency, too. Airports and airlines have developed a better plane-navigation system to space planes more closely at JFK, for example, but it’s hard to get the airport to use the technology, in part because of neighborhood opposition to more low-flying planes.

Another obstacle to tourism growth is the lousy ground transportation to and from JFK. The decade-old AirTrain, which drops people off at Jamaica’s Long Island Rail Road station for a 35-minute ride into midtown Manhattan, is better than nothing, but it’s a far cry from what other world-class cities such as London and Paris offer: a direct trip, right into an urban center. And the transportation infrastructure matters to the tourism industry in other ways. “Getting your employees to work at a reasonable price” and on time “is really important,” says the Marriott’s Stengel. Delays and fare hikes cause headaches for employers as well as workers. Workers come from “Queens, Brooklyn, Staten Island, and New Jersey; it’s just as important as getting tourists” in, he maintains. Getting raw-ingredients deliveries into JFK via the clogged Van Wyck Expressway is a major challenge, even with a schedule from 3 AM to noon to avoid the heaviest traffic, Straube says.

New York can help encourage more visitors in other ways. Almost everyone who talks to global tourists hears that the Port Authority, which runs the airports, could be a lot friendlier to non-U.S. passport holders—the long, slow-moving lines to get into the country are a source of constant complaint. Persuading the federal government to add countries such as Brazil to the global visa-waiver program—through which visitors can bypass the cumbersome process of applying for visas in their home countries—could bring real benefits as well. “When [South] Korea became a waiver country” in 2008, “we saw Korean business double or triple,” recalls Stengel.

Then there’s crime, which, while still at historical lows, remains an issue for the tourism industry. Wogas says that illegal street-side bike vendors plague his business, for example, with hawkers harassing tourists to rent stolen bikes rather than rent from legal firms. Worse, the mid-August pellet-gun shooting of a Central Park jogger brought to mind the bad old days of a crime-ridden Manhattan, though cops caught the alleged culprits quickly.

The most immediate challenge for New York tourism, though, is the global economy itself. A now-rising dollar means that New York hotel rooms and airfares aren’t as cheap for foreign tourists as they were recently. A deep recession in China, Brazil, or other developing countries could also stagger city tourism. “We’ve had a run of good demand,” says Gold of the hotel union. Gold also worries, in the short term, about overbuilding hotels. New York, with 111,549 hotel rooms, according to STR, has another 32,205 rooms under construction or in planning, the most ever. The market is so hot that developers are flipping hotels before they open them. “Crime is down, the dollar has been weak for a while, the BRIC countries”—Brazil, Russia, India, and China—“are doing well. From Germany [and] Britain, people [are] coming here for shopping trips. But even if it did continue,” Gold concludes, the risk is that “an oversupply is going to be a drag on our daily room rate.”

A higher dollar and prolonged global recession would lay bare New York’s expensive cost structure because it would be harder for hotels and airlines to pass high costs on to their customers. “The risk at JFK and the New York market overall is rising costs,” says Flying Food’s Liu.

Even as the dollars flow in, the city must also avoid the temptation to give preferential treatment to tourism via tax deals and special favors to hotels, casinos, and other businesses targeted to visitors. After all, it’s the city’s success in finance, technology, media, and other industries that makes New York an interesting place to visit. Cities like Atlantic City, Las Vegas, and Orlando that have used economic and planning policies to pursue tourism for its own sake have tended to create monotonous cultures; they become “tourist cities,” which can come to bore not only residents but tourists, too. Though Orlando—once a swamp that built itself around theme parks—has done fine with visitors since 2008 (its new Harry Potter attractions are a big draw), the gambling destinations of Vegas and Atlantic City have struggled.

As it is, the nature of the global economy is already pressuring New York, London, and Paris to become more similar—with the same chain stores and restaurants lining shopping districts from the Champs-Élysées and the Boulevard Saint-Germain to Regent Street and Oxford Street to Fifth Avenue and Times Square. But people come to New York (or, for that matter, London and Paris) because it’s not like everywhere else. The city should strive never to lose sight of that.

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