European summer vacation

Bottom Line

A record 71 million Americans drove, and another 32 million flew over the past Independence Day holiday week, according to AAA and the Transportation Security Administration. But due to the strength of the dollar versus the British pound and the euro—and flush with stock market gains from the likes of the S&P 500’s powerful 38% rally of the past nine months—many well-heeled Americans also have been heading to Europe. In addition to the typical attractions and destinations, tourists are attending a variety of sporting and entertainment events. The Wall Street Journal reports Europe is enjoying its best year of air travel since 2019, with a record 2.3 million American arriving in May alone.

Lush greenback From its recent peak of 1.42 against the pound in June 2021, the dollar has rallied to an attractive 1.29. That’s a sharp contrast from the 2.11 in November 2007. Today’s roughly 50% cheaper pound is a powerful motivator to head to the British Isles. Similar story with the euro. From its recent peak of 1.23 in January 2021, the dollar has rallied to around 1.09. That’s a far cry from the 1.60 seen in July 2008.

Exit recession This tourism boost has helped the UK and eurozone extricate themselves from mild recessions last year. U.K. GDP was breakeven on a quarter-over-quarter (q/q) basis in the second quarter of 2023, then declined 0.1% and 0.3% in the third and fourth, respectively. But it bounced 0.7% in this year’s first quarter, a trend that likely continued in the second. In the eurozone, GDP rose 0.1% q/q in last year’s second quarter, was breakeven in the third and declined 0.1% in the fourth. But it rebounded 0.3% in this year’s first quarter, a trend that probably extended into the second quarter.

Growing consumer bifurcation in the U.S. Roughly speaking, the top two-thirds of Americans own a home and 60% own stocks. As existing home prices and the S&P have surged nearly 60% and 150% from the depths of the pandemic, these upper-end consumers have benefited from a stout wealth effect that’s allowed them to spend. In contrast, lower-end consumers are stressed. Many are experiencing higher levels of credit-card delinquencies and cutting back on spending.

Tennis anyone? The French Open came first from May 26 through June 9, with total attendance of 675,000 tennis fans and ticket revenue of $75 million. There’s an economic multiplier many times that, of course, for airfares, hotels, restaurants, bars, taxis, merchandise, etc. Wimbledon took place from July 1-14, with 533,000 fans in attendance and $81 million in ticket revenue. The star was Carlos Alcaraz, who became only the sixth man in history to win both tournaments in the same year. 

European football Germany hosted Euro 24 from June 14 through July 14. This tournament is akin to the Super Bowl, with 24 national teams competing in 51 matches in 10 different stadiums across the country. Some 275,000 soccer fans spent $1.1 billion for tickets alone, before factoring in the sizable multiplier effect. Across Europe, millions packed pubs and bars wearing their colors. Spain won their fourth title in dramatic fashion, defeating England with a last-minute goal. 

City of lights Paris is hosting the 2024 Summer Olympic Games from July 26 through August 11. Some 2.5 million are expected to attend and spend around $1.5 billion in ticket revenue alone, with an estimated multiplier effect of $2.8 billion. This excludes the economic effect of the billions of euros of infrastructure spending France financed to build the infrastructure to host the games. The Wall Street Journal estimates that the total economic impact could approximate $10 billion. 

The Taylor Swift economy From May through August this summer, the pop superstar is bringing her Eras Tour to Europe. She will play 51 concerts across the UK and Europe. By the end, more than three million “Swifties” likely will have spent around $3.3 billion on ticket sales. Take her eight sold-out concerts at Wembley Stadium: with a capacity of 90,000 at an average ticket price of $1,000 per seat (many trading on the secondary market), 720,000 fans likely will generate at least $720 million for a seat. That's extraordinary, but the economic and travel multipliers are off the charts because many attendees are coming from around the world, some because they could not get tickets in their local markets. 

Research assistance provided by Federated Hermes summer intern Jake Kavan

Connect with Phil on LinkedIn