For American travelers going abroad, the rising strength of the dollar is the upside of the volatile economy. The exchange rate with the euro is currently about 1.04 US dollars, that is, every 100 euros will cost about 104 dollars. One euro was worth about $1.22 this time last year. The current price has fallen significantly from its high in 2008, when each euro was equal to 1.58 dollars.
The dollar rose against other foreign currencies as well, including the British pound. Currently, one dollar buys about 82 pence, making the cost of 100 pounds about $122. The price last June was 70 pence to the dollar, which means that 100 pounds cost about $143 at the time.
This means that spending abroad is cheaper. A 5 euro glass of wine in Rome in 2008 probably cost about $8, compared to $5.20 today. Perhaps a €100 rent apartment in Paris at $104 this summer was $158 when the euro peaked. A 60-pound ticket to the London revival of “Cabaret” now costs $73, while a similar show last summer would have cost $85.
But are you better off, considering that hotels and flights cost more now too? How do you make sure you get the best price? Here’s what’s moving the market and how to make the most of a strong dollar abroad.
Why is the dollar rising, and for how long?
The dollar has risen significantly against the euro and some economists believe it may reach parity – something we haven’t seen in 20 years – by the end of the year.
Why go up? Since the Federal Reserve raised interest rates to reduce inflation, the move made investments here more attractive, which is one of the main reasons behind the strength of the dollar, according to Tom Smith, professor of finance at the University of Florida Gulf Coast in Fort Myers, Florida. In addition, the invasion caused Russia to Ukraine destabilize the world’s economies, prompting investors to seek safe havens.
“When bad things start to happen, people tend to go back to US investments and that will boost the dollar relative to other currencies,” Mr. Smith said.
All this means that US dollars will buy more in many overseas destinations. Most experts believe that the dollar will remain strong throughout the year.
Diana Hechler, owner of D Tours Travel, based in Larchmont, New York, that specializes in European travel, calls the improved rates a “sweetener” for customers considering Europe this summer and may help them overcome other considerations.
But aren’t the prices higher, too?
As at home, prices are up abroad, about 8 percent among the United States’ major trading partners, according to Mr. Smith.
“The prices will still be high, but compared to what they were six months ago you will be able to buy more,” he said.
It’s not just bloating at work. Strong demand led to higher prices.
At Tourist Journey, an online platform that allows travelers to customize travel planning in 20 countries, typical trip costs in Italy are 60 percent higher than last summer, when travel in Europe was particularly low and prices were especially low.
“With many of the hotels we partner with, regardless of budget, there is simply no availability,” Ben Julius, founder of Tourist Journey, wrote in an email, noting that hotel rooms on the Amalfi Coast that cost $750 and then are now priced at about 1000 dollars.
Prices for airline tickets, usually purchased in US dollars, have also gone up. Round trip trips to Europe average $971, up 13 percent, according to flight-booking app Huber, but less than a 30 percent increase in domestic fares, which currently average $395 one way.
A stronger exchange rate removes some of the stinging from housing price increases. The average daily rate for a hotel room in Europe in April was €118 ($123 using today’s exchange rate), compared to €109 ($114) in April 2019, an increase of nearly 8 percent since the pandemic, according to STR, the hotel standard. . a company. By comparison, the average increase in hotels in the US in that period was about 14 percent and the average price in April was about $150.
“Generally speaking, hotel rates in Europe are more reasonable than local rates, and the exchange rate only helps with that,” said Keith Waldon, founder of Departure Lounge, a high-end travel agency in Austin, Texas, who recently spent two months in Florence. “In addition, restaurant prices have fallen in many cases as restaurants try to reorder.”
With seven Parisian locations, Orso hotels averaged 85 percent occupancy in June, which is a high rate. However, management has only raised their prices slightly in response to the demand. His nightly prices at the Hotel Leopold in the Montparnasse district in 2019, when it just opened, were 150-200 euros. Its average price in June is 216 euros.
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“While we could increase our nightly rates after two years of hardship, we decided not to take the risk because we want people to come back to Paris and be happy with their trip and get it at a fair price,” said Louis Solanit, the owner. .
He and his wife, Danny Groner, director of marketing in New York City, decided to go to Copenhagen and London instead of Panama this summer when they heard about the favorable exchange rate for the euro. (Since Panama uses the dollar effectively, the cost of traveling there will not change due to the strength of the dollar.) Most of its budget will go to airlines and hotels, but they expect savings on accepting museums, tours, and food.
“If getting there and stabilizing is costing me a bit, I am optimistic that every other purchase will be a comparable bargain,” said Mr. Groner.
Mrs. Hechler, the travel agent, recently returned from a cruise on the Danube River where she had started her Christmas shopping.
“I was used to $1.45 per euro,” she said. “Why don’t you go shopping now?”
How to get the most out of the exchange rate
There are three basic financial steps to ensuring you get the best exchange rate possible, according to Leigh Rowan, founder of Savanti Travel, a travel management company based in San Francisco: Pay with a credit card with no foreign transaction fees (select this by contacting your bank); withdraw cash abroad, if necessary, via an ATM in local currency (and skip currency exchange at airports, which offer lower rates); And always specify the local currency when purchasing with a credit card if there is a choice between it and the US dollar.
By transacting in the local currency, you are avoiding what is known as a dynamic currency conversion, where the merchant lets you know the cost in your national currency and may trade based on your ignorance of the official conversion rate.
“If you pay the merchant in dollars, they raise their own price,” Mr. Rowan said. “If 100 euros is around $108, they might offer $118 and you’ll pay more because you’re confused.”
Convenient foreign exchange is just one incentive for many current travelers.
“Our travelers have maximized their dollars over the past three to six months, visiting countries like Argentina and South Africa,” Karim George, owner of Culture Traveler, a travel agency in Franklin, Michigan, wrote in an email. “The stronger dollar’s stimulus is compounded by the fact that many of these destinations are still far from epidemic visitation levels. Travelers enjoy the main attractions with fewer crowds and are greeted warmly and with interest by locals eager for tourism to return.”
Elaine Glusak writes the frugal traveler’s column. Follow her on Instagram Tweet embed.