Migration, inflation and vacation

by Admin
Migration, inflation and vacation

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I’m writing this Swamp Notes from London, where last week the UK Labour party triumphed over the Tories in a major election rout. Lots to say about that, and my Financial Times colleagues have covered the waterfront. In a couple of weeks, when I’m back from holiday, I’ll offer Labour my own list of lessons to take from Bidenomics, given that the party seems likely to try and implement some version of it at home. But in the meantime, I’d like to focus this note on a different topic — the inflationary effects of tourism. 

I’ve been in and out of hotels in various countries in the past few weeks, and I’m seeing Americans everywhere I go spending big money. At one dinner at a posh restaurant in London’s theatre district last week, literally every table I passed was filled with Yanks. Southern Europe, where the weather is of course far better, is even more packed. The Wall Street Journal recently ran this piece on Americans fuelling price jumps in places such as Italy, Spain, Greece and Portugal, as they freely shell out for $1,000 a night hotel rooms and $300 dinners.

The trend is down to three things: a strong dollar; a strong post-coronavirus recovery in the US (thanks in large part to the massive fiscal stimulus that was given to consumers); and the relatively weaker recovery in Europe, which was hit harder by things such as the war in Ukraine. You could start to see free-spending Americans abroad last summer, anxious to get back to Europe post-pandemic. But this summer looks to set new travel and spending records.

My husband and I spent his birthday in Greece in May, and while prices weren’t quite what they would be at a fancy east coast resort in the US, they weren’t far off. That might be good for European tax receipts and job creation (at least in the hospitality and leisure sector), but it’s also fuelling resentment from locals who can no longer afford housing near their jobs. The result is a growing economic bifurcation in certain hot travel spots, where you have latte drinkers and latte makers. This is the Aspen effect come to Europe — and it can end very badly.

Already, many European countries are having second thoughts about the boom. Just a few headlines I’ve seen recently that play into all this:

  • Thousands in Tenerife demonstrating against mass tourism even though 35 per cent of GDP comes from the industry

  • Amsterdam is banning the construction of new hotels to keep the number of tourists down

  • Venice has begun charging a fee to get on to the island

Europeans aren’t the only ones concerned. Japan is complaining there are too many tourists crowding already-stuffed cities and endangering fragile ecosystems. And now that the Chinese are also starting to travel again post-Covid, parts of Asia and Europe in particular will probably get more crowded and expensive.

Despite a weaker recovery relative to the US, I think people living in many global tourists spots in particular saw how nice it was without barbarian hordes of visitors everywhere during the pandemic. Tourists are the new locusts, and if they are going to eat all the grain, they may have to pay a lot more for it. I suspect that American companies like Uber and Airbnb that are perceived as not paying enough local taxes may also come under scrutiny.

Back home in the US, what I’ve noticed about travel and tourism is how migrants, always well represented in the industry, have come to dominate it. I was at a business conference in Montana a few weeks ago, and like Jackson Hole, Nantucket, the Hamptons and other vacation hotspots, the service staff seem to hail mainly from eastern Europe, Africa and the Caribbean. As I write in my Monday column, America’s own ability to grow without much inflation has been dependent on the migrant labour force.

But the sense of rich Americans spreading inflation elsewhere, while importing staff to keep it down at home, may not sit well with everyone. Gideon, have you also noticed this trend in your travels, and what do you imagine the economic, political and social impact of it might be?

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Gideon Rachman responds

Hi Rana,

Glad you are enjoying your holidays in Europe and you are (sadly) right to get out of the UK, where the weather is dismal. I sometimes wonder if Britain has been cursed by some weird anomaly of global warming that is making our weather colder and damper. On the other hand, rained-off days at Wimbledon were also a regular feature of my childhood. (And at least Centre Court has a roof, these days)

As for American tourists — the current era has a rather 1950s feel to it. Back then, postwar Europe was much poorer than the US and American tourists, splashing the cash, rubbed home the point. Over the last 15 years, the US economy has again significantly outperformed Europe and you can see the results in the strong dollar — and in the restaurants and hotels of the old continent. 

Is this a bad thing? I think Europeans should be careful about what they complain about. Sure, there is some grumbling about too many tourists — although it is often Chinese tour parties that seem to attract the most ire, since they travel en masse. But tourism is Europe’s most important industry and a massive earner of foreign exchange. I think we should also be proud and pleased that Europe retains a unique mixture of scenery, architecture, food and culture that makes it attractive to visitors from over the world. Europe is a lifestyle superpower.

Can you have too much of a good thing? Perhaps in a few cases. There are a couple of European cities that I would now steer clear of in peak season: Venice, you mention, and probably also Barcelona. There were, in fact, demonstrations against mass tourism in Barcelona just recently.

But Barcelona and Venice are both relatively small places, so St Mark’s Square or Las Ramblas can just be overwhelmed. When you get to the bigger cities — Paris, Rome, London — it is not that hard to get away from the crowds. You just have to avoid the obvious tourist traps — or manage when you go. Last time I was in Paris, the queues at the Musée d’Orsay were off-putting in the morning, but I was able to walk straight in an hour before closing time.

As for the vexed question of Airbnb — I have to say that I’m a fan and a user, so it would be hypocritical of me to complain. There are certain areas, such as the Marais in Paris, where there are now so many apartments for short-term lets that the locals are upset and complaining. It also means that the divide between the haves — who own property and can monetise it — and “generation rent” will only get wider. But Europeans are also big users of Airbnb and there must be ways of regulating the business, to make sure that it doesn’t overwhelm particular areas or buildings. 

Tourism is still Europe’s golden goose. We really don’t want to kill it.

Your feedback

And now a word from our Swampians . . .

In response to “Who should be on the Democratic ticket?”:

“There are two problems with the Democratic Party pushback on why President Biden should move aside for fresh — and younger — blood. First, no matter how stellar the past four years have been, it does not ensure that the next four years will be equally great. There was nothing in Thursday’s debate that gave any confidence in President Biden’s ability to match his achievements of his first term.

Second, it was not just a bad night. For anyone who has witnessed the decline of an elderly friend or relative, President Biden’s incoherence and inability to counter former President Trump’s multiple lies, this was not just a bad debate. It was a clear sign that President Biden doesn’t have the same mental capacity he had four years ago.

The risk of former President Trump being re-elected has risen, and it is a scary prospect. President Biden’s chances of beating Trump have greatly diminished. He should step aside to make way for a younger candidate who could beat Trump. My vote is with a Whitmer/Booker ticket.” — Janet Lewis

Your feedback

We’d love to hear from you. You can email the team on swampnotes@ft.com, contact Rana on rana.foroohar@ft.com and Gideon on gideon.rachman@ft.com, and follow them on X at @RanaForoohar and @gideonrachman. We may feature an excerpt of your response in the next newsletter

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