Apples to apples: Eleven nations, one currency

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AUDIO: The speech referenced in the article below and other speeches from Travel Weekly's Euro Conference are available in their entirety, exclusively on Crossroads.

Image NEW YORK -- "What is the big deal about the euro?"

This is what many friends and colleagues asked when Travel Weekly proposed a conference on the subject for the travel industry. "After all, it's just another currency," one industry source said.

If the speakers at Travel Weekly's Euro Conference proved anything, it was that the single currency -- to be adopted by 11 countries on Jan. 1 and possibly by a few more countries, such as the U.K. and Denmark, by 2002 -- is a revolutionary undertaking. The revolution is reflected in the possibilities for the travel industry, often contradictory, that could result from monetary union.

Consider these excerpts from the pages of this special report, which reflect the Euro Conference's focus on agents and their clients:

  • U.S. agents won't be able to escape the euro, even in the States, Simon Jarvis, Visa International's senior vice president of global support services, told conference attendees. "Increasingly, you'll be requested to pay for packages and services in the euro," Jarvis predicted.
  • "I do suspect [suppliers] will see this [the introduction of the euro] as another opportunity to obtain additional revenue either through a commission cut or through actual leveling up of prices." -- Dan Maschoff, vice-president, international, BTI WorldTravel Partners in Northbrook, Ill.
  • "So we want to know when they [suppliers] pay us commissions, what the values are going to be [once the euro is introduced] and how it will differ" from current practice.That's very important when you consider that's our livelihood and our income we're talking about." -- Allen Rich, president of Rich Worldwide Travel in Harrison, N.Y.
  • One European Travel Commission official in Brussels estimated that the euro will increase arrivals from the U.S. by 5% over the next four to six years, due to a possible drop in prices within the euro zone.
  • The implications for the industry are daunting to some, invisible to others.

    Many agencies with a global presence have been hard at work converting their accounting and computer systems to accommodate the euro.

    Hoteliers with European properties are faced with a similar challenge.

    But Mr. and Mrs. Smith, going to Europe next year for the first time, face their own set of challenges. In Paris, can they pay for their foie gras in euros or francs? Why does the French .50 euro coin look different from the Italian .50 euro coin? And will the Smiths have to pay more to change dollars to francs, now that a third step is required by banks and exchange bureaus?

    It's likely that Mr. and Mrs. Smith will ask these very questions of a front-line agent. And the Smiths are more likely to return to the agent who might at least be familiar with the dilemmas facing Europe-bound travelers over the next few years.

    With all the talk I have heard from our conference speakers about how the euro will make travel easier, it behooves agents to know that for many Americans, who can sometimes have a myopic worldview, nothing that is new is easier.

    I asked one friend what she knew about the euro. "You mean that Greek sandwich?" she responded. (She is otherwise very well educated. I promise.)

    Such reactions are important when you consider that my friend might be frustrated if she visits Europe between January and July 2002, during which time both national currencies and the euro will be legal tender in the 11 euro countries.

    (The folks who will profit the most during this period are manufacturers of calculators.)

    Moving on to the big picture, an often-discussed issue in European financial publications is pricing and how costs in the euro 11 might change as a result of the new currency.

    A euro Web site operated by the U.K., which will not adopt the euro in the first round, makes a strong argument for the euro's impact on pricing: "The euro will mean big changes for business both within these countries and throughout Europe. For example, there are likely to be: "Cheaper transaction costs -- countries in the euro zone will not have to change currencies when doing business with each other. Exchange rate certainty -- sharing a single currency means countries in the euro zone will no longer be affected by currency fluctuations when trading with each other. Transparent price differences -- it will be more obvious if different euro zone countries charge different prices for the same goods and services."

    Most predictions lean toward the theory of a price leveling within the euro zone that would raise prices in cheaper countries and lower them in more expensive nations, but the jury is still out. Nobody has yet to answer the question that was the title of a conference session: "Will a Big Mac in Portugal and Germany soon cost the same?"

    But several speakers did tackle the issue of price transparency -- the apples-to-apples effect -- as it pertains to tour costs.

    However, the euro's impact on Europeans is not waiting for predictions. The day of Travel Weekly's Euro Conference, Nov. 11, a friend in France told me his bank statement is now in euros and French francs. "This is fine for me," he said, "but customers have already lined up to protest what they perceive as the bank's abandonment of French sovereignty."

    How quickly Europeans accept the euro and the demise of their national currencies will determine the pace at which restaurants, shops and other touristic businesses allow for and encourage euro payments. And if non-euro countries surrounding the euro zone eventually accept the new currency, this will make travel more convenient and affordable.

    New currency raises tough questions

    By Dinah A. Spritzer

    NEW YORK -- If the euro were just another currency, as some observers have put forth, its implementation would not raise the following questions, many of which were addressed by speakers at Travel Weekly's Euro Conference and in the pages of this special report, and many of which cannot be answered until the currency matures, perhaps three, six or even 10 years from now:

  • Will the euro make Europe an economic dynamo, rivaling the U.S. as a financial super state and thus permanently changing business travel patterns and practices?
  • Will Paris and Frankfurt leap ahead of London as centers of finance, also raising the demand for accommodations in and transportation to these cities?
  • Will Great Britain become a euro country by default, even though its government is fixed to a "wait and see" euro policy?
  • Will the euro lessen cultural differences between countries, diluting national traditions that have helped make Europe the world's leading tourism destination?
  • Will countries outside of the euro zone, especially those in the former Eastern Bloc, tie their currency to the euro and accept it as legal tender within their borders? What will they gain or lose from a price perspective as tourist destinations when the euro is phased in?
  • Could the euro lead to mass unemployment and social unrest if the euro zone's companies consolidate -- as many economists predict -- and countries are unable to increase social spending because of fiscal restrictions placed upon them by the European Monetary Union?
  • Will U.S. travelers be able to take advantage of the new price transparency that the euro will create, as European consumers compare the cost in euros of everything from car rentals to pantyhose?
  • Will the new transparency place a downward pressure on air fares within Europe, as price differences based on country of origin and currency become obsolete?
  • Will a strong euro mean higher hotel, food and entertainment costs in Europe?
  • Will agents and operators lose sales to the Internet, as consumers get comfortable comparing euro-priced packages on line?
  • Who will pay for the multibillion-dollar cost of the euro's implementation? Will you? Will your clients?
  • How will the euro -- together with the Y2K debacle -- complicate technology systems here and in Europe?
  • How will the anticipated initial volatility of the euro's value against the U.S. dollar affect your clients and your business?
  • Will the euro zone's national governments stick it out with the euro when times get tough? The euro was ratified through a tumultuous process in many countries, where only the slimmest majority won out.
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  • Dinah A. Spritzer, Travel Weekly
  • Simon Jarvis, Visa International
  • Dan Maschoff, BTI WorldTravel Partners
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