A euro just doesn't buy as many Megabucks pulls as it used to.
Blame the slump in Europeans' purchasing power on fiscal turmoil in Greece, along with rumors that those troubles could spread to Spain, Ireland and other countries. Investors no longer see the euro as a safe bet, so they're returning to the dollar in droves. That bolsters Americans' buying power overseas, but it erodes the spending clout Europeans wield in Las Vegas and other U.S. markets. Will a dip in European travel to Las Vegas follow?
Start by considering the numbers. The euro hit a high against the dollar of $1.60 in July 2008, and stayed near that mark through most of 2009. Since November, though, the euro has dropped 16.6 percent, from $1.51 to $1.26. That means residents of the 16 euro-based countries, which include France, Germany, Holland, Ireland, Italy and Spain, enjoy 16.6 percent less buying power stateside today.
Yet, most observers say the euro's slide won't affect international travel to Las Vegas, at least in the near term.
For one thing, most foreign tourists visiting the United States arrange their travel months in advance, said Larry Greenberg, president and founder of New York-based CurrencyThoughts.com. If overseas visitors had planned a summer trip, their itinerary was likely in place weeks or months ago, before the euro began its nosedive.
Plus, European visitation isn't a huge segment of the city's tourism base. At MGM Mirage, visitors from Europe and the United Kingdom make up about 3 percent of occupancy at the company's 10 Strip hotel-casinos, said spokeswoman Yvette Monet. Company officials monitor currency rates closely, Monet said, but a decrease in such a small portion of MGM Mirage's business isn't likely to have a big impact on the operator.
International visitation made up 15 percent of the market's tourism base in 2008, with Europeans responsible for 26 percent of that base, according to numbers from the U.S. Department of Commerce.
Rich Moriarty, principal of local research and analysis firm Union Gaming Group, said his company is watching the euro and its influence on travel, but Union's analysts aren't "overly concerned at the margin" about the euro-to-dollar relationship.
"That certainly hasn't been what dropped the city's visitor volume over the last couple of years," he said. "It could have a little bit of an effect, but not enough to make a meaningful impact."
Las Vegas actually derives much of its international visitation from Asian rather than European markets, Moriarty noted. What's more, a stronger dollar gives Americans better buying power, so increased domestic travel should offset any declines from Europe.
Nor has the value of the dollar relative to foreign currencies historically posed a direct correlation to arrivals to the United States, a source with the U.S. Travel Association said. Other important determinants include the economy of the outbound traveler's country, disposable income, general demand for travel to the United States and access to travel here. A weak dollar in recent years didn't boost overseas visitation, largely because stepped-up security measures after the terrorist attacks of Sept. 11, 2001, made U.S. trips a bigger hassle for international guests. That's why the U.S. Travel Association is lobbying to improve the visa process, and to bring more countries into the visa-waiver program for short-term visitor travel.
Still, a sustained fall in the value of the euro could eventually take its toll, some experts said.
"I doubt if it's a direct correlation, but if the euro keeps going down, of course it's going to impact travel," said Ronald Simpson, the Florida-based director of foreign-exchange economics with analysis firm Action Economics.
Currency values can affect travel: Simpson recalled how famed London department store Harrods advertised to U.S. consumers in The New York Times when the British pound plummeted to a value of $1.03 in the 1980s.
"At the extreme levels, it would have an impact," Simpson said. "Parity (when one euro equals $1) would be a pretty major psychological point for travelers."
If the euro falls below $1.25, Simpson said he sees risk for "considerably more downside" in the currency -- perhaps even parity some time in the fourth quarter. That's because European governments haven't solved the debtor problems plaguing Greece, Spain and other countries; they've simply bought time with a lending infusion to stem immediate fiscal panic.
Greenberg agreed the euro has issues that'll be tough to overcome. For one thing, the euro yokes together 16 countries, none of which can depreciate their currency to overcome individual fiscal ills. The only option left? Austerity measures, such as cutting workers' pay and benefits, and those policies yield weak growth. The result could be long-term economic torpor in Europe, and that wouldn't bode well for the euro.
But Greenberg doesn't expect parity between the dollar and the euro anytime soon. The currency traded as low as 82 cents in 2000, but the euro shouldn't dip much below its historical average of $1.18, he said.
"I've learned in this field to never say never, but unless this thing entirely blows up and you really have a total disaster, I would bet against seeing the euro at par or weaker against the dollar by Thanksgiving," Greenberg said. "That would be an enormous 12-month move in currency that we rarely see."
Contact reporter Jennifer Robison at jrobison @reviewjournal.com or 702-380-4512.