NEW YORK (MainStreet) — This year’s summer vacation planning begins not with glitzy photography of Tuscan food, or a video of a tour of an ancient ruin, or anything else you are used to. It begins with close study of a currency conversion chart. Dry? Not when you translate the results into better hotel rooms, better food and more dollars in your pocket. That is because the dollar suddenly is on a tear, especially against the euro.
But careful: many experts, although noting that nobody has the crystal ball that will predict accurately where the dollar is heading, caution that recent mutterings by the Federal Reserve Board - whose actions or inactions shape the dollar’s global value - suggest that the good times are ending. The Fed, it is said, wants a cheaper dollar so U.S.-made goods will be cheaper abroad and therefore will sell more. That is Econ 101.
What matters to us is right now. Call up your favorite chart showing the dollar versus the euro. Here’s one. Pay attention. We are diving into the mathy weeds. On April 27, 2011 the dollar closed at 0.675 vs. the euro, meaning it took about three dollars to buy two euros. On March 7, 2015, the dollar closed at 0.922 - very close to parity with the euro. On March 25, 2015, it closed at 0.911. Not a big decline, but that trend could continue.
Enough math. What does this mean to a traveler? Nigel Osborne, vice president at travel company Keytours Vacations International, put it bluntly: “The U.S. dollar is at its strongest in 11 years against the euro, so any European country using the euro is a good value.”
Europe, he said, is on sale.
Online travel agency Orbitz shared numbers that prove the point. In Paris, according to Orbitz, year on year, 2015 vs. 2014, spring hotel rates are down 14%. In Rome, they are down 4%. In Barcelona, they are down only 2%. But they are down in a city that has emerged as one of Europe’s trendiest travel destinations. Similar dips will be there for summer travelers, Orbitz predicted.
Importantly, everything in the euro zone is cheaper against the dollar, not just hotel rooms. From morning coffee to an evening nightcap - with museum admissions, metro rides and pizza slices in the middle - it all costs less because of the dollar’s strength.
Air fares also are down, according to Orbitz. Summer air to Paris for instance is down 10% year on year. Rome is down 1%.
Incidentally, it’s not just the euro that is weak. The Indian rupee, for instance, traded at 44.25 against the dollar on April 18, 2010. On March 26, 2015, it was 63.29 - meaning a traveler effectively gets half again more for a dollar than just five years ago.
Similar is true of most of the globe’s currencies, so if you have long wanted to go somewhere that seemed too pricey, check again. On April 24, 2011, the dollar was worth 0.95331 of a Bhutanese Ngultrum. On March 26, it was worth 1.25, well over a 25% bounce in value.
Add up all the econometrics and here is why action now is required. Explained Sean Finelli, co-owner of TheRomanGuy tour company and a onetime Wall Street worker: “The Federal Reserve has announced that exchange rates will increase in the U.S. and historically, when this happens the dollar weakens. What will that mean for travelers? A more expensive European vacation than they planned.”
Orbitz editorial director Jeanenne Tornatore offered another reason to book now. The flood of summer bookers, she said, will begin in mid April - meaning that now remains something of a slow season and that is good for bargain hunters.
Don't delay. Book now for best values.
—Written by Robert McGarvey for MainStreet
This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.