For American travelers going abroad, the growing strength of the dollar is the benefit of a volatile economy. Currently, the exchange rate with the Euro is around $1.04, which means that every 100 Euro will cost around $104. One euro was worth about $1.22 this time last year. The current rate is down significantly from its peak in 2008, when each euro was worth $1.58.
The dollar is also up against other foreign currencies, including the British pound. Currently, $1 buys about 82 pence, so the cost of 100 pounds is about $122. Last June the rate was 70 pence to the dollar, which meant that 100 pounds cost around $143 at the time.
This means spending abroad is cheaper. A €5 glass of wine in Rome in 2008 would have cost around $8, compared to $5.20 today. A 100-euro rental apartment in Paris that cost $104 this summer could have cost $158 when the euro peaked. And a £60 ticket to London’s hit revival of ‘Cabaret’ now costs $73, while a similarly priced show last summer would have cost $85.
But are you better off, given that hotels and flights are also more expensive now? And how do you make sure you get the best price? Here’s what’s driving the market and how to make the most of a strong dollar overseas.
Why is the dollar rising and for how long?
The dollar has appreciated considerably against the euro and some economists believe it could reach parity – something not seen for 20 years – by the end of the year.
Why is it going up? While the Federal Reserve raised interest rates to bring inflation down, the move made investing here more attractive, which is one of the main reasons the dollar is stronger, according to Tom Smythe, professor of finance at Florida Gulf Coast University in Fort Myers, Florida. Additionally, the Russian invasion of Ukraine has upended global economies, sending investors seeking safe havens.
“When bad things start to happen, people tend to go back to US investments and that will strengthen the dollar against other currencies,” Smythe said.
All of this means that US travelers’ dollars will buy more in many overseas destinations. And most experts believe that the dollar will remain strong throughout the year.
Diana Hechler, owner of Larchmont, NY-based D Tours Travel, which specializes in European travel, calls the improved fares a “sweetener” for customers considering Europe this summer and can help them weather the storm. other considerations.
But aren’t the prices also higher?
As at home, prices are up abroad, by about 8% among the main trading partners of the United States, according to Mr. Smythe.
“Prices are still going to be high, but compared to six months ago you will be able to buy more,” he said.
It’s not just inflation at work. Strong demand pushed prices up.
At Tourist Journey, an online platform that allows travelers to personalize their trip planning in 20 countries, the costs of a typical trip to Italy are 60% higher than last summer, when European travel was depressed and particularly low prices.
“With many hotels we partner with, no matter the budget, there is simply no availability,” Ben Julius, the founder of Tourist Journey, wrote in an email, noting that the rooms at hotel on the Amalfi Coast were $750. then are now priced around $1,000.
Airfares, normally purchased in US dollars, are also on the rise. Round trips to Europe cost an average of $971, up 13%, according to airline ticket booking app Hopper, but less than the 30% increase in domestic fares, which are currently in average $395 round trip.
The strengthening of the exchange rate partially mitigates the increases in accommodation rates. The average daily rate for a hotel room in Europe in April was 118 euros ($123 using today’s exchange rate), compared to 109 euros ($114) in April 2019, an increase of about 8% since the pandemic, according to STR, a comparative analysis of hotels. solidify. By comparison, the average increase in hotels in the United States during this period was almost 14% and the average rate in April was around $150.
“Generally, hotel rates in Europe are more reasonable than domestic rates, and the exchange rate only contributes to that,” said Keith Waldon, founder of Departure Lounge, an upscale travel agency in Austin. , Texas, who recently spent two months in Florence. “Also, in many cases, restaurant prices have fallen as restaurants attempt to bring demand back.”
With seven Parisian establishments, Orso Hotels posted an average occupancy rate of 85% in June, which is high. Yet management only raised prices slightly in response to demand. His rates per night for the Leopold hotel in the Montparnesse district in 2019, when it had just opened, were 150 to 200 euros. This month of June, its average price is 216 euros.
Travel trends that will define 2022
Looking forward. As governments around the world ease coronavirus restrictions, the travel industry is hoping this will be the year travel comes back strong. Here’s what to expect:
“While we could increase our rates per night after two years of distress, we have decided not to take this risk because we want people to return to Paris and be satisfied with their trip and have it at a fair price” , said Louis Solanet, the owner. .
Along with his wife, New York marketing manager Danny Groner decided to go to Copenhagen and London rather than Panama this summer when they heard about the favorable exchange rate with the euro. (Since Panama does indeed use the dollar, the cost of travel there will not be affected by the strength of the dollar.) Most of their budget will go to airlines and hotels, but they expect to save on museum entries, tours and food.
“If it costs a little more to get there and settle in, hopefully all the other purchases will be a bargain by comparison,” Groner said.
Ms Hechler, the travel agent, recently returned from a cruise on the Danube where she got off to a good start for Christmas shopping.
“I was used to $1.45 for one euro,” she said. “Why don’t you go shopping now?” »
How to make the most of the exchange rate
According to Leigh Rowan, founder of Savanti Travel, a travel management company based in San Francisco, there are three essential financial steps to ensure you get the best possible exchange rate: Pay with a credit card with no transaction fees at abroad (determine this by calling your bank); withdraw money abroad, if necessary, via an ATM in the local currency (and avoid exchange offices at airports, which offer lower rates); and always select the local currency on a credit card purchase if you have the choice between it and US dollars.
By trading in local currency, you avoid what is known as dynamic currency conversion, where a trader lets you see the cost in your home currency and can trade on your ignoring the official conversion rate.
“If you pay a trader in dollars, they mark up their own rate,” Rowan said. “If 100 euros is worth around 108 dollars, they could offer 118 dollars and you will pay more because of your confusion.”
A favorable exchange rate is just an incentive for many current travelers.
“Our travelers have maximized their dollars the most over the past three to six months, visiting countries like Argentina and South Africa,” wrote Kareem George, owner of Culture Traveler, a travel agency in Franklin, Michigan. , in an email. “The incentive for a stronger dollar is compounded by the fact that many of these destinations remain far from their pre-pandemic occupancy levels. Travelers are enjoying major attractions with fewer crowds and are being greeted warmly and attentively by locals eager to bring back tourism.
Elaine Glusac writes the Frugal Traveler column. Follow her on Instagram @eglusac.