July 16, 1999

Business Fare

Sharp Decline of the Euro
Is a Boon for U.S. Tourists

A WALL STREET JOURNAL News Roundup

Praise the euro and pass the champagne: Europe is on sale.

A sharp decline in the value of Europe's common currency to near parity with the U.S. dollar has made the continent a cheaper vacation destination for Americans this summer. Travelers are staying in nicer hotels, dining in fancier restaurants and shopping with bargain-basement zeal.

"We've noticed that the Americans accept our highest rates without asking questions," says Ariana Dordit, who handles marketing for the opulent Cipriani hotel in Venice.

The value of the euro has fallen from a high of $1.19 on Jan. 4, its first day of trading, to about $1.01. The currencies of the 11 European nations that adopted the euro are locked into fixed exchange rates, so as the euro falls, so do German marks, French francs, Italian lire and other key European currencies. One U.S. dollar used to buy five French francs; now it buys about six.

Adding to the bonanza for Americans, air fares to and from Europe have fallen. Airlines have been rapidly adding planes to trans-Atlantic markets, even moving widebody jets from Asia because of slumping economies there. Now, with too many seats to fill, ticket prices have been cut sharply. Some carriers have even offered two-for-one ticket specials. The European Travel Commission is predicting a record year of 11.5 million American visitors this year, up about 5% from 1998.

U.S. travelers can take advantage of the weak euro in several ways. A round-trip business-class ticket between Chicago and Paris, for example, costs $7,428 on American Airlines. But buying two one-way tickets, one of which will be priced in French francs, knocks the total cost down to $6,211 -- a savings of 16% for the same American flights, says Terry Trippler, travel expert at 1travel.com.

'Airlines Don't Like It'

Even better, fly from Chicago to Paris via Toronto, where the U.S. dollar outmuscles its Canadian counterpart. That itinerary knocks the price of the business trip down to $4,357, including a first-class seat between Chicago and Toronto. "Airlines don't like it," Mr. Trippler says, "but how are they going to stop it?"

Travelers also can try to book through European Internet sites where tickets are denominated in local currencies. Credit-card companies convert the foreign currencies into U.S. dollars, giving the traveler the advantage of the favorable exchange rate. And if travelers think the dollar will strengthen more against the European currencies, they should avoid prepaying as much as they can, and buy their trip piecemeal rather than in a package, travel experts say. Once in Europe, pay for everything with a credit card. By the time the bill arrives, the exchange rate may be even more favorable.

"It's the arbitrage," says travel agent Jim Pazienza of UniGlobe Travel in Washington, D.C. He notes that his customers now do better with European hotels rather than U.S.-based chains, which tie their rates more closely to the U.S. dollar.

For many Americans, the favorable exchange rate is more of a pleasant surprise than an inducement to go abroad. Travel agencies say most travelers don't base vacation plans on currency fluctuations -- and those who do are going to Asia or to Canada, where the dollar is even stronger than in Europe. "When the German mark is strong, we don't see a stampede away from Germany," says Melissa Abernathy, a spokeswoman for American Express. "People go to Europe because they want to go to Europe."

In fact, the exchange rate notwithstanding, many European cities remain expensive compared with other destinations, even within the U.S. Houston travel agent Joe Galloway has been searching for a nice hotel in Venice for clients and found most are booked solid. Even with the currency advantage, the best deal he could get was a room for $475 a night at a hotel comparable to a $300-a-night hotel in New York.

"Little places in Paris that we used to sell for under $100 several years ago now are $250 to $300," says Mr. Galloway, president of Trans-Continental Travel and the current president of the American Society of Travel Agents. Still, he adds, "we're having a great year in Europe."

Extra Days

Mike Mitchell, a retail consultant from Roswell, Ga., who has been traveling to Spain for the last nine years for the running of the bulls in Pamplona, has noticed sharp inflation in beer and hotel costs this year. Even so, he said, his dollars are stretching further this year. "We'll be able to stay a few extra days," he said.

In Paris, Liz Brown and Amity Van Hauser, recent college graduates from California, took advantage of the euro's fall by drinking wine with every meal. "For us that's an extravagance," Ms. Brown said.

The British pound, which isn't tied to the euro, has fallen only 5.8% against the dollar this year. As a result, American tourists in London are saying the city is as pricey as ever. Nathan Myers from Louisville, Ky., took his girlfriend to Europe for her birthday. Arriving in London from Paris, the couple immediately noticed the difference: "We couldn't believe how much more expensive everything was" in England, he said, regretting that he hadn't bought his girlfriend's birthday present in France.

"I'm going to give her a Burberry's raincoat," he said. "But had I known, I would have gone for the Hermes scarf."

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