For US travelers going abroad, the dollar’s growing strength is the advantage of a volatile economy. Currently, the exchange rate with the euro is about $1.04, which means that every 100 euros costs about $104. Last year, one euro was worth around $1.22. The current rate is significantly lower than in 2008, when each euro was worth $1.58.
The dollar also deals with other foreign currencies, including the British pound. Currently $1 buys about 82 pence, making the cost of 100 pounds about $122. Last June, the rate was 70 pence to the dollar, meaning 100 pounds cost about $143 at the time.
This means that spending abroad is cheaper. A $5 glass of wine in Rome in 2008 may have cost about $8, compared to $5.20 today. A 100 euro rental apartment in Paris costing $104 this summer may have been $158 when the euro peaked. And a £60 ticket to London’s ‘Cabaret’ revival now costs $73, while a show of the same price would have cost $85 last summer.
But are you better off, as hotels and flights are now more expensive too? And how do you make sure you get the best rate? Here’s what’s driving 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 appreciated significantly against the euro and some economists believe it could be as high as parity – something not seen in 20 years – by the end of the year.
Why is it going up? Since the Federal Reserve has raised interest rates to lower inflation, this move has made investment here more attractive, which is one of the main reasons the dollar is stronger, according to Tom Smythe, a professor of finance at Florida Gulf Coast University in the United States. Fort Myers, Florida. In addition, the Russian invasion of Ukraine has sent world economies on a rampage, forcing investors to look for safe havens.
“When bad things start to happen, people tend to migrate back to US investment and that will make the dollar stronger against other currencies,” said Mr. smythe.
All this means that US traveler dollars will buy more in many overseas destinations. And most experts believe that the dollar will remain strong throughout the year.
Diana Hechler, the owner of D Tours Travelbased in Larchmont, NY, which specializes in European travel, calls the improved fares a “sweetener” for customers considering Europe this summer and could help them overcome other considerations.
But aren’t the prices higher?
Just like at home, prices have risen abroad, about 8 percent among the United States’ major trading partners, according to Mr. Smythe.
“Prices will still be high, but compared to six months ago, you can buy more,” he said.
It’s not just inflation at work. Strong demand has pushed prices up.
Bee Tourist tripan online platform that allows travelers to adjust their travel plans in 20 countries, the costs for a typical trip in Italy are 60 percent higher than last summer, when travel in Europe was low and fares were particularly low.
“With many hotels we work with, it doesn’t matter what the budget is, there just isn’t availability,” Ben Julius, the founder of Tourist Journey, wrote in an email, noting that hotel rooms on the Amalfi Coast which went for $750 then are now priced around $1,000.
Airfares, which are normally purchased in US dollars, have also increased. Round-trip flights to Europe cost an average of $971, a 13 percent increase, according to the airline ticket booking app Hopperbut less than the 30 percent increase in domestic fares, which currently average $395 round trip.
The stronger exchange rate takes some of the sting out of the property increases. The average daily rate for a hotel room in Europe in April was 118 euros ($123 at the current exchange rate), compared to 109 euros ($114) in April 2019, an increase of about 8 percent since the pandemic, according to STR, a hotel benchmarking firm. . In comparison, the average increase in hotels in the United States over that period was nearly 14 percent, and the average rate in April was about $150.
“In general, hotel rates in Europe are more reasonable than domestic rates, and the exchange rate only helps that,” said Keith Waldon, the founder of Departure lounge, a high-end travel agency in Austin, Texas, that recently spent two months in Florence. “In addition, restaurant prices have fallen in many cases as restaurants are trying to bring demand back.”
With seven Parisian locations, Orsoz Hotels an average of 85 percent occupancy in June, which is high. Yet management has increased its prices only slightly in response to demand. The nightly rates for Hotel Leopold in the Montparnesse district in 2019, when it just opened, was 150 to 200 euros. In June, the average rate is 216 euros.
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“While we could increase our nightly rates after two difficult years, we decided not to take that risk because we want people to return to Paris and be happy with their trip and have it at a fair price,” said Louis Solanet, owner . †
With his wife, Danny Groner, director of marketing in New York City, decided to go to Copenhagen and London this summer instead of Panama when they heard of the favorable exchange rate with the euro. (Since Panama uses the dollar effectively, the strength of the dollar won’t change travel costs there.) Most of their budget goes to airlines and hotels, but they expect to save on museum visits, tours, and food.
“If it costs a little more to get there and arrange, I’m hopeful that every other purchase will be a bargain by comparison,” said Mr Groner.
Ms. Hechler, the travel agent, recently returned from a cruise on the Danube River where she got off to a flying start with Christmas shopping.
“I was used to $1.45 to the euro,” she said. “Why not go shopping now?”
How can you make the most of the exchange rate?
There are three essential financial steps to ensure you get the best exchange rate possible, according to Leigh Rowan, the founder of Savanti Travel, a travel management company based in San Francisco: pay by credit card with no foreign transaction fees (determine this by calling your bank); withdraw cash abroad, if necessary, through an ATM in the local currency (and skip the currency exchanges at airports, which offer worse rates); and always select the local currency when making a credit card purchase if given a choice between it and US dollars.
By trading the local currency, you avoid what is known as dynamic currency conversion, where a trader shows you the costs in your national currency and possibly trades based on your ignorance of the official exchange rate.
“If you pay a dealer in dollars, they raise their own rate,” Mr. Rowan said. “If 100 euros is about $108, maybe they offer $118 and you pay more because of your confusion.”
A favorable exchange rate is just one incentive for many current travelers.
“Over the past three to six months, our travelers have maximized their dollars most by 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 of a stronger dollar is compounded by the fact that many of these destinations are far from their prepandemic visitation levels. Travelers enjoy major attractions with fewer crowds and are warmly and attentively greeted by locals eager to see tourism again.”
Elaine Glusac writes the Frugal Traveler column. Follow her on Instagram @eglusac†