For American travelers going abroad, the growing strength of the dollar is the bright side of a volatile economy. Currently, the exchange rate against the euro is about $1.04, which means that 100 euros cost about $104. One euro was worth about $1.22 this time last year. The current rate has fallen significantly since its peak in 2008 when each euro was worth $1.58.
The dollar has also appreciated against other foreign currencies, including the British pound. Currently, 1 dollar costs about 82 pence, making the cost of 100 pounds about 122 dollars. Last June, the rate was 70 pence per dollar, meaning that 100 pounds was around $143 at the time.
This means that spending abroad is cheaper. A €5 glass of wine in Rome in 2008 would have cost around US$8, compared to US$5.20 today. A €100 rental in Paris costing $104 this summer might have cost $158 at the time of the euro’s peak. And a £60 ticket to London’s hit revival of Cabaret now costs $73, while a similarly priced show last summer would have cost $85.
But are you better off considering hotels and flights cost more now too? And how do you make sure you get the best price? Here’s what’s driving the market and how to make the most of a strong dollar abroad.
Why has the dollar gone up and for how long?
The dollar has appreciated significantly against the euro, and some economists believe it could reach parity by the end of the year – something not seen in 20 years.
Why is it going up? As the Federal Reserve has raised interest rates to lower inflation, the move has made investing here more attractive, which is one of the main reasons the dollar is strong, according to Tom Smythe, a professor of finance at Florida Gulf Coast University in Florida Fort Myers, Fla. Additionally, the Russian invasion of Ukraine has rattled the global economy and sent investors looking for safe havens.
“When bad things happen, people tend to gravitate back to US assets and that will strengthen the dollar relative to other currencies,” Mr Smythe said.
All of this means that US travelers will buy more in many overseas destinations. And most experts believe 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 rising prices a “sweetener” for customers considering Europe this summer and can help them overcome other considerations.
But aren’t the prices also higher?
As at home, prices are up about 8 percent abroad at the United States’ major trading partners, according to Mr. Smythe.
“Prices will still be high, but compared to six months ago, you will be able to buy more,” he said.
It’s not just inflation at work. Strong demand has pushed up prices.
at Tourist tripAn online platform that allows travelers to customize their travel plans in 20 countries, the cost of a typical trip in Italy is 60 percent higher than last summer, when travel in Europe was sluggish and prices particularly low.
“With a lot of the hotels we work with, budget isn’t a factor, there’s just no availability,” Tourist Journey founder Ben Julius wrote in an email, noting that hotel rooms on the Amalfi Coast were $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, up 13 percent, according to the flight booking app funnelbut 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 overnight rate hikes. The average daily price for a hotel room in Europe was 118 euros ($123 at today’s exchange rate) in April, compared to 109 euros ($114) in April 2019, an increase of about 8 percent since the pandemic, so STR, a hotel benchmarking festival. By comparison, the average increase at hotels in the United States during that period was nearly 14 percent, and the average rate in April was about $150.
“Generally, hotel rates in Europe are cheaper than domestic rates, and the exchange rate only helps,” said Keith Waldon, founder of departure hall, a high-end travel agency in Austin, Texas, who recently spent two months in Florence. “Also, in many cases, restaurant prices have fallen as restaurants try to rekindle demand.”
With seven Paris locations Orso hotels is at an average occupancy rate of 85 percent in June, which is high. Nevertheless, the management has only slightly increased the prices due to the demand. The Hotel Leopold in the Montparnesse district cost 150 to 200 euros per night in 2019, when it just opened. This June, the average price is 216 euros.
Travel trends that will define 2022
Looking ahead. As governments around the world ease coronavirus restrictions, the travel industry is hoping this will be the year travel returns. Here’s what you can expect:
“Although we were able to increase our accommodation prices after two difficult years, we decided not to take that risk because we want people to come back to Paris happy with their trip and have it at a fair price,” said Louis Solanet , the owner .
With his wife, Danny Groner, a marketing director in New York City, decided to go to Copenhagen and London rather than Panama this summer when they heard about the favorable exchange rate against the euro. (Because Panama effectively uses the dollar, the dollar’s strength does not alter travel costs.) Most of their budget goes to airlines and hotels, but they expect savings on museum admissions, tours, and food.
“If it costs a little more to get there and settle down, I’m confident that every other purchase will be a bargain in comparison,” said Mr. Groner.
Mrs. Hechler, the travel agent, has recently returned from a cruise on the Danube where she had a go at Christmas shopping.
“I was used to $1.45 per euro,” she said. “Why don’t you go shopping now?”
How to make the most of the exchange rate
According to Leigh Rowan, the founder of , there are three key financial steps to ensure you’re getting the best exchange rate possible Savanti Travel, a San Francisco-based travel management company: Pay with a credit card with no international transaction fees (find out by calling your bank); Withdraw cash abroad if needed from an ATM in the local currency (skipping the exchange offices at airports that offer worse rates); and always choose local currency when making a credit card purchase when faced with a choice between local currency and US dollars.
By trading in local currency, you avoid what is known as dynamic currency conversion, where a trader shows you the cost in your local currency and may trade based on your ignorance of the official conversion rate.
“When you pay a trader in dollars, they raise their own rate,” Mr. Rowan said. “If 100 euros is like $108, maybe they offer $118 and you pay more because of your confusion.”
A favorable foreign exchange rate is only an incentive for many current travelers.
“Our travelers have maximized their dollars the most over the last three to six months by visiting countries like Argentina and South Africa,” wrote Kareem George, the owner of cultural traveller, a travel agency in Franklin, Mich., in an email. “The allure of a stronger dollar is compounded by the fact that many of these destinations are still a long way from their pre-pandemic attendance levels. Travelers enjoy the main attractions with fewer crowds and are greeted warmly and attentively by locals interested in tourism returning.”
Elaine Glusac writes the Frugal Traveler column. Follow her on Instagram @eglusac.