What a Falling Euro Means for International Travel

Financial IQ

Bad economic news in Europe can mean good news for everyone else who wants to take a trip there. For Americans who long for (and can afford) a European jaunt, the value of the US dollar against the Euro is a glimmer of good news.

As of mid-January, the US Dollar to Euro conversion was $1.28, the lowest level in quite some time (the 2011 peak was $1.48 in May). The 14 percent drop in the conversion rate means that a $2,500 European adventure costs $350 less did than it did last spring.

If the drop in the Euro has you itching to take a Transatlantic trip, here are some things to consider before you fly across the pond.

Getting There

The bad news: Getting to Europe has not gotten that much cheaper. Airfares remain high and it’s nearly impossible to gain any currency exchange advantage on Transatlantic plane tickets.

The good news: Travel within Europe, either by plane or train, is usually less expensive when purchased over there. Also, hotels, meals and other expenses have been lowered by currency rates.

Where to Go

There are steep bargains in the rocky economies of Greece, Spain, Portugal and Ireland this winter, versus a year ago. According to Expedia, Madrid’s hotel prices in December were down 24 percent. Even Italy, a popular travel destination, is seeing more bargains. Germany’s relatively robust economy makes it less of a deal but Americans will still get a boost from the higher value of the Dollar against the Euro.

Don’t expect many deals in countries not tied to the Euro, like the United Kingdom and Switzerland. While Britain’s economy is rocky, dragging down the pound, the Summer Olympics taking place there in July and August are driving up the already high cost of hotel rooms.

Traveling Around

“Once travelers land in a major European hub, they can score some of the best deals by flying on budget airlines within Europe,” says Peggy Goldman, President of the tour operator Friendly Planet Travel. For example, Ryanair, the European equivalent of Southwest Airlines, has flights to many European cities starting at $15 one-way, excluding taxes and fees. Goldman also says car rental companies aren’t going to increase prices. The same goes for train travel, although Eurail passes, which are priced in dollars, are the exception.

Hotel rates are another place where Americans will see immediate savings but keep in mind that the price you see when you book the room and the price you’ll actually pay when you check out could change. Depending on which way the Euro moves between the reservation and your vacation, this could help or hurt you. If you believe the Euro will rise, it would be better to prep-pay and lock in the more favorable rate. If the Euro falls further, wait until you check out to pay in order maximize the savings.

How to Pay

Try to pay in Euros instead of dollars whenever possible. European merchants often give American travelers who use plastic the courtesy of paying for purchases in U.S. dollars, but Goldman says don’t fall for it. This “dynamic currency conversion” service they offer actually allows them to charge exchange rates up to 10% higher than those offered by MasterCard and Visa.

Consider applying for a credit card that doesn’t charge foreign transaction fees, which adds an average of 3 percent to all your purchases. Cards that don’t typically charge those fees include Capital One cards and high-end offerings from American Express and Citibank.

What to Buy

To see the sights, check tourism bureau websites again. Many in the big cities sell city cards that cover public transit costs, admission to museums and discounts to other attractions. Do the math first to see if they’re worth it, as sometimes you may have to visit up to five museums just to break even.

If you’re in a shopping mood, it’s a good time to buy locally-produced goods in Euros. So if you’re in Italy, that means leather in Rome and the famed glass from the island of Murano near Venice. “The weak euro is a good opportunity for fashion lovers,” says Goldman.

Vanessa Richardson is a freelance writer in San Francisco who writes about small business and personal finance.

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