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Paris Tourism Feels the Economic Chill

At his Paris souvenir shop on the Boulevard de Clichy, at the foot of Montmartre, manager Amir Mezzine is getting desperate. His sales have plummeted 30% since last year. Fewer tourists are stopping by—and those who do spend less. He has rejiggered his inventory, replacing higher-priced items like sweatshirts and framed prints with Eiffel Tower key chains, Moulin Rouge magnets, and other cheap trinkets, to no avail. "We are unable to adapt," he sighs.

Paris, the most-visited city in the world, is getting clobbered by a sharp downturn in global travel. International passenger arrivals at the city's two airports were down 8.1% year-on-year in February, and hotel occupancy rates dropped 10%. Even visits to the Eiffel Tower have fallen 7% from last year. (Overall, the U.S. Commerce Dept. figures visits by Americans to Europe tumbled 7% last year.)

That's putting a big dent in the city's $13.2 billion-a-year hotel and restaurant business, which, along with other tourism-related activities, employs 12.1% of the city's population. "It's a catastrophe," says Bertrand LeCourt, president of l'Hôtellerie Familiale, a hotel owners' association.

Empty Rooms and Tables It's not just sightseers who are staying away. Business travel held up relatively well during 2008, because many conventions and trade shows were planned well in advance. But now it's slumping, too. "February really scared us," said Gérard Cros, owner of the Sport Hotel, a 95-year-old establishment near the Bois de Vincennes that caters to business travelers. Occupancy at the hotel in February was down 10% from a year earlier, Cros says.

Restaurants are hurting, too. "There are a lot less tourists, even those who are well-off," said Catherine Castanier, manager of the Coupe d'Or, a café near the fashionable shops of the Rue du Faubourg Saint-Honoré. Castanier says sales are down 20% from last year.

Some of the city's most exclusive eateries have introduced more affordable menu items and fixed-price meals. At the sumptuous Hotel Plaza Athénée in the swank Eighth Arrondissement, the Relais Plaza restaurant introduced a fixed-price dinner menu for $66, about half the average à la carte bill of $130, after suffering a 10% drop in clientele between December and March. "We're not worried about our future, but we are paying attention," a spokeswoman says.

Midpriced restaurants also are feeling the pain, as patrons trade down to fast food and takeout sandwiches from the local bakery. "The midmarket places are the ones that really suffer," because their profit margins are too narrow to allow them to cut prices significantly, says Xavier Barbaux, co-founder of Salt & Pepper, a restaurant consultancy in Paris.

Yankees Stay Home Even before the global financial crisis took hold last summer, the euro's strength against the dollar was keeping Americans away. The number of U.S. visitors checking into Paris hotels fell 18.3% from 2007 to 2008. The euro has weakened by 15% vs. the dollar since its peak last April, but that hasn't been enough to bring back droves of tourists.

A decline in visitors from China, until recently a growing source of tourism revenue, also makes matters worse. Nan Cheng, who organizes visits for Chinese tourists and business travelers at Paris travel agency Via Chine Voyages, estimates that the number of tours he organizes has dropped by half since last summer. The only good news, Cheng says: "Those who do come spend just as much—there are just fewer of them."

Indeed the recession doesn't seem to have dampened some tourists' shopping enthusiasm. At the Swarovski crystal counter in the Galeries Lafayette department store on Boulevard Haussmann, saleswoman Melody Vauzelle estimates that as much as 40% of her sales are to Chinese visitors. "Consumption by the French may have dropped, but with our foreign clients, it has not," she says.
Stecker is a reporter in BusinessWeek's Paris bureau.

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