NYC merchants grapple with tourism decline

NEW YORK -- Every year, Randy Pope makes his annual trip to New York from his hometown of Hattiesburg, Miss. Seeing New York in December is a memorable experience and Pope expects this year, despite the terrorist attacks, to be no different.

"There's nothing like it," said Pope, 50, who, along with his wife and daughter, will spend several hundred dollars shopping during his visit the last week of December.

"We love the decorations, visiting FAO Schwarz, seeing the windows at Tiffany's, and skating in Rockefeller Center," he said.

If only New York retailers had more customers like him. The city's $50 billion retail industry is still feeling the effects of Sept. 11, including a lack of out-of-towners and in particular, visitors from overseas.

Merchants who have also been pummeled by the overall consumer spending slowdown are turning more to residents of the city's five boroughs, who are expected to spend the holiday season close to home. And they're courting daytrippers from suburbs including New Jersey and Connecticut.

Macy's, which is promoting itself as a piece of Americana, is among those wooing local shoppers, advertising in subway and commuter train stations.

"We are forced to think local," said Rochelle Pfenning, director of visiting services at Macy's famous Manhattan store. But the strategy seems to have worked -- after falling off sharply in September and October, store traffic is back to busy holiday levels.

Delivery service

Bergdorf Goodman is dispatching trucks of designer clothes and furs to the suburban homes of its best customers, who may be nervous about traveling into Manhattan. Toy retailer FAO Schwarz has sent out 2 million catalogs, double the number from last year, hoping to woo shoppers who feel uncomfortable in public places.

Although tourism and sales have partially recovered since the attacks, business is still far below the levels expected.

The number of tourists in the city, which fell more than 60 percent during the first few weeks after the attacks, is now down by about 10 percent to 15 percent from a year ago, according to Cristyne L. Nicholas, president and chief executive of NYC & Co., New York City's tourism marketing organization.

NYC & Co. launched the "Paint the town red, white and blue" campaign to revitalize tourism, which has resulted in an uptick in the number of consumers from the Northeast, she said.

Still, retail sales for holiday are expected to be down 25 percent in Manhattan, even with heavy discounting, Nicholas said. The most vulnerable are the high-end department stores and specialty designer stores.

"Sales have been so volatile in New York," said Barrie Berg, partner with the consultancy Booz Allen Hamilton, which is working with the New York Partnership, a business advocacy group, to assess the economic impact of the attacks and help formulate a revitalization plan.

Berg doesn't see business improving soon, given consumers' unwillingness to spend on discretionary items. At some of the major midtown stores, sales were down 20 percent to 30 percent in November, she said.

Devastating drop

The drop in business is devastating for national chains including Saks Inc. and Federated Department Stores Inc., which operate big stores in Manhattan. Retailers' New York stores could represent as much as 35 percent of total company sales, Berg said.

In fact, a sharp drop in sales at Macy's and Bloomingdale's flagship stores prompted Federated, its parent, to warn of lower-than-expected profits for the rest of the year.

The biggest blow is the lack of international tourists, who traditionally account for 18 percent of the annual tourist traffic, but make up 42 percent of spending, according to NYC & Co.