Although an ever-weaker U.S. dollar is
making travel abroad a more expensive proposition for Americans,
tour operators, foreign tourist boards and others in the industry
say outbound departures and forward bookings remain on the rise --
strong interest in Europe, Asia and South America for 2005, largely
due to a release of pent-up travel demand, thanks to consumer
The change for the
tours we sell in the $1,000 range is only $100 [off] last year, and
I dont think thats a deal-breaker for most people, said Loren
Siekman, general manager of Discover France Tours in Scottsdale,
Ariz. Theres definitely anxiety on our side of the business, but I
havent had anyone say theyre not going to Europe this
In fact, the
European Travel Commission (ETC) in New York predicts record
numbers of U.S. vacationers will visit Europe next year, matching
levels not seen since 2000, when 12.8 million Yanks crossed the
But this rosy
status quo could end if the bottom falls out of the
The dollar has been
in decline against other currencies for three years. Since late
2001 it is off some 34% against the euro, 24% vs. the British
pound, 20% vs. the Japanese yen and 25% vs. the Canadian
One bright spot can
be found south of the border, where the dollar has gained 26%
against an even weaker Mexican peso (see story, at
But the greenback
has slowly lost ground even against the Indian rupee (-7%), Russian
ruble (-10%), Brazilian real (-26%) and Australian dollar (-38%).
Worse yet, its precipitous drop is intensifying.
Analysts at Merrill Lynch
in New York said the U.S. dollar declined by 5% against the euro
and the yen in November alone, trading at all-time and
four-and-a-half-year lows, respectively, against those
A Nov. 22 report
from Merrill Lynch warns that the dollar could dip further should
the federal deficit worsen and the Chinese yuan -- now pegged to
U.S. currency -- be revaluated.
So, how much
further could the dollar fall? Lionel Barber, U.S. managing editor
at U.K. newspaper the Financial Times, told delegates to the ETCs
recent Transatlantic Conference in New York that the dollar still
has 15% to 20% to fall.
Merrill Lynch analysts are forecasting that from December through
March the euro will appreciate from $1.29 to $1.33, the pound
sterling will drop from $1.84 to $1.82
and the yen will strengthen and trade at 100 yen for every
So, what has been
the impact on global travel thus far, particularly in destinations
where the dollar is weak? Not very significant, at least in Europe,
which isnt surprising, said analyst Neil Martin of Donald Martin
and Co. in New York.
In the 1990s, the
dollar performed just as poorly against the pound and other
currencies, yet annual U.S. arrivals grew from 1993 through the
watershed 2000 and 2001 seasons.
Traffic grew in the
90s because the basic U.S. economy was strong and people could
afford to travel, said Martin. So theres reason to be hopeful based
on past experience.
Tom Wright agreed that many things make us less susceptible to
exchange rates nowadays, such as increased air capacity and a
surplus of hotel rooms -- which put downward pressure on pricing --
as well as a trend toward shorter vacations by
forecasts 5% growth for the year and a 3% rate for 2005, after
recording a 13% increase in U.S. arrivals from January to
The areas most
impacted are dining and shopping, Wright added. There is some
erosion in the amount Americans are spending, but thats as much
about shorter stays as it is about less shopping and eating
concur that Americans -- despite the poor exchange rates -- still
seem to be in the grip of wanderlust.
Were up a lot going
into 2005, and our numbers now for next year, although its very
early, are up 25%, said John Galvin, chief financial officer at
Col- lette Vacations in Pawtucket, R.I. He added that Europe,
Canada, Australia and New Zealand all have sold well.
operators, it seems larger outfits are better able to weather
Any large tour
operator is likely to have engaged in hedging strategies to ensure
pricing stability, Galvin said.
Executives at one
European tourist board claimed smaller tour operators specializing
in their destination are recalling 2005 brochures from printers so
prices can be raised 10%. But some smaller firms seem to be able to
hedge a bit, too.
Tours in Bloomfield, N.J., pays its vendors via Europe-based,
euro-denominated bank accounts, according to Jose Barreiro,
director of wholesale operations.
We bought euros
before the dollar really started to drop and locked in at a rate of
about $1.20, Barreiro said. So basically, we arent affected because
the rate we contracted at is the rate we bought euros
Heritage is requesting guaranteed U.S. dollar rates from hotels.
Not everyone is willing, but for the hotel looking for U.S.
business, its a way to be very competitive, Barreiro
Carlton Tower plans to introduce guaranteed dollar rates for the
first time this January, despite working to reduce dependency on
director of sales and marketing, said he is working to build U.S.
business via travel agency relationships and offers that help more
Americans visit, even while exchange rates arent in their
Executives at top
operators said the traditional escorted tour -- which has lost some
ground in recent years to customized and FIT travel -- is now more
attractive than ever.
Sometimes theres a
benefit to these situations for us, said Scott Nisbet, executive
director of sales and marketing at Globus & Cosmos, where
bookings to Asia, the South Pacific and South America are outpacing
Europe. A packaged tour is such a significantly better deal in
times like these.
But Scott Supernaw,
vice president of sales and marketing at Tauck World Discovery,
sounded a note of caution.
Although [the poor
exchange rate] makes our product more attractive to travelers who
might otherwise try to build their own tours, what may affect us is
the negative publicity among those to whom shopping is critically
A weak dollar also
is forcing travelers to re-examine their travel plans in terms of
destination, duration and price point.
Galvin of Collette
Vacations said Americans often decide domestic travel is a better
bet. Ashley Isaacs-Ganz, president of luxury operator Artisans of
Leisure in New York, said her clients are looking farther afield
for exotic but reasonably priced vacations, such as honeymooners
who were considering Italy but are now looking at Thailand and
Although a smaller
outfit, Artisans of Leisure has taken a hit to shield clients who
are booking custom itineraries from recent currency fluctuations,
but it may change some published prices soon.
On the plus side,
operators such as Globus & Cosmos that sell inbound travel to
the U.S. are set to make a killing. Its looking to be healthy
double-digit growth from Australia and the U.K. right now, Nisbet
reporter Kenneth Kiesnoski, send e-mail to [email protected].