Follow the Bouncing Dollar

Written by kvfawcett on July 12, 2010 – 4:35 pm -

The U.S. dollar hasn’t been this strong against the Euro in more than five years. That isn’t a shabby incentive to motivate Americans to take to the skies and head to Europe. There’s no question there’s been a pent-up demand to travel—and why not do so when your money will go a whole lot further?

According to a survey conducted by TripAdvisor.com, which polled more than 1200 Americans, 60 percent of them are planning to come to the E.U. in 2010, up 50 percent from 2009.

(Surprisingly, only six percent of the people surveyed stated they were reconsidering their travel plans because of the Eyjafjallajökull volcano in Iceland even though volcanologists are predicting it isn’t dormant and won’t be for quite a while.)

The favorable exchange rate makes a trip to Europe more manageable—or may just put it back in reach if you’ve been feeling priced out of the market. Bonjour Paris has been saying that if you’re coming to Europe for a short vacation, a few dollars here and there do not make a live-or-die difference. But it’s a real difference and it’s your money. Here are a few numbers.

A little over two years ago, a euro cost $1.60. Today, it costs a little less than $1.25. That’s like getting a 22-percent raise or, to make it very practical, 100€ spent in restaurants costs you about $122 (today’s exchange rate), not $160. Does that sound real enough?

Apparently it does to quite a few people. We conducted a very quick poll on our Bonjour Paris Facebook Page and queried our readers about their plans. Some people commented that, because of the current exchange rate, they’re booking tickets to France since it’s simply too good to pass up. Others posted they’d planned their trips when the dollar was at $1.40 to the euro and would go anyway, stating that the elevated airfares are the real sticking point.

Those truly (under $300 round-trip) deep-discounted fare wars seem to be a thing of the past, which makes sense because of the cost of fuel. Fares may look good until all of the add-ons are factored into the price.

Kathleen Delgado commented that she travels to France four to five times a year on business, so the exchange rate is not the deciding factor. But Kathleen commented, “Since I’m not made of money and have respect for the money I earn and the people who help me earn it, the exchange rate does impress me.”

Other Bonjour Paris readers say they’re feeling some respite from when the dollar didn’t buy as much. Dorothy Bain Raviele plans to make improvements to her home in Europe and do some more traveling thanks to the lower euro.

Some of our most faithful readers (merci) Barbra Timmer and Richard and Kathy Nettler posted they’re currently in France and enjoying the dollar’s increased buying power.

Hotels, restaurants and other businesses in the service industry that target an American clientele are seeing a definite increase in business.

For American expats who live in the E.U. and whose income is dollar denominated, we feel as if we’ve come into a small inheritance from a relative who worried about whether or not we’d be able to pay our bills. Yes, we’ve received a slight reprieve from what’s felt like poverty, especially for those of us who have lived in France since its currency was denominated in francs. It’s been a financial roller coaster, whether or not we were prepared for the ride.

On the other hand, Americans who invested in property in the E.U. with the idea they might return to the U.S., sell their homes and convert their profits into dollars aren’t so happy today because of the limp euro. Few of us anticipated we’d need to be experts in currency arbitrage when buying our primary residences. Well, you can’t have it both ways, have your cake and eat it, and (for good measure) on ne peut pas avoir du beurre et l’argent du beurre.

Not being an economist, I don’t pretend to know whether or not the euro has been overvalued—although given the way all the members of the currency union have been fibbing about their deficits, there’s some good evidence that it has been. If that is the case, then, on the one hand, it’s overdue and, on the other… well, as Harry Truman said, it would be nice to find a one-handed economist. But the facts of the moment are right in front of us. The euro is down and likely not to rise very far any time soon.

So, here’s a question for everyone. Is the lower value of the euro having any effect on your plans for travel? If so, how? Let us know. We’re always glad to hear from you.

© Paris New Media, LLC


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