NEW YORK -- Buoyed by a comparatively weak U.S. dollar, the euro
has soared in value this year, and some peddlers of Europe product
are feeling the pinch.
While travel agents and their clients, distracted by economic
woes, terror threats and health scares, may not have clocked a
negative "euro effect" on transatlantic travel, many tour operators
aren't so lucky.
In fact, operators -- particularly smaller ones and those that
published prices for 2003 last year or earlier, at better exchange
rates -- are bearing the brunt of the euro's rise, whether their
bookings are up or down.
For example, I.T.S. Tours in College Station, Texas, published a
two-year Europe brochure for 2002-2003, with pricing, just after
9/11, according to Michael Barszap, president.
"We assumed we could absorb the difference if the euro
fluctuated, but now it's about 25% higher," Barszap said. "We
thought the euro might rise 3% to 5%; little did we know."
At press time, the euro -- common currency in 12 of the 15
members of the European Union -- was trading at $1.17, which was
the high at which it debuted as a "virtual," nonpaper currency in
There was a time when the dollar was stronger: In October 2000,
the euro was worth just $0.82, and when actual euro bills and coins
hit the streets of Paris, Rome and Berlin on Jan. 1, 2002, the
European currency had risen to only $0.89.
But it's been on an upward surge back to its opening price ever
since, despite weak Europe economies, largely thanks to worse times
in the U.S. and Japan.
In short, skittish investors are stocking up on euros instead of
dollars and yen.
Analysts at Deutsche Bank Research in Frankfurt predict this
"bandwagon" effect could lead to an overvalued euro eventually
trading at up to $1.30.
Now U.S. operators -- especially those who sell traditionally
less-expensive southern Europe destinations -- face a triple
First, the price transparency lent by a common currency has led
to a leveling of prices across the "Eurozone," meaning costs have
jumped in Italy and Spain to approach those in, say, the
Netherlands and France.
That's affected Italy operators such as Dawn Bosco, president of
Amelia International in Hicksville, N.Y.
"Compared with 16 months ago, there's been a major rise in hotel
rates, and restaurant meals are more expensive," she said. "I'm
sure tourists who buy vacation packages without meals are going to
That's because, secondly, the dollar's fall has eaten into U.S.
buying power in Europe, bad news for the majority of operators that
negotiate rates with suppliers in euros, rather than in
And third, some tour operators feel pressure to put already
heavily discounted product on sale yet again, to convince
travel-wary Americans to consider booking, further aggravating
At Globus & Cosmos in Littleton, Colo., director of
marketing Steve Born said the last thing the worldwide tour
operator would consider is a price hike; in fact, the opposite is
"Anytime we face currency changes, it's a cost to us," he said.
"But we're offering additional incentives and discounts ... because
the marketplace still needs a deal. We can't afford to be
Of course, Globus & Cosmos, which sells 70 destinations
worldwide, is better positioned than smaller, more-specialized
competitors to absorb blows on the European front.
"We're not the victims of one particular market or currency,"
The honor system
Most operators agree that passing on price hikes to consumers is
a last resort, but Bosco of Amelia International -- which published
a brochure featuring Italian product for all 2003 last November --
is finally considering such a move.
"We've been honoring our published prices, but we're seriously
going to have to reconsider that for the second half of the year,"
said Bosco, adding that Amelia might have to raise its rates by 5%
to 10% on fall departures to Italy.
And although bookings at Amelia are brisk, they're not enough to
make up for losses, she said.
Barszap at I.T.S. Tours -- which is honoring those 2001 rates
through Dec. 31 even though bookings are off 15% to 20% from
"normal" years -- said he "can live with this until our next
brochure comes out in August."
EuroBound in Los Angeles is getting the short end of the stick
with group bookings, such as the imminent 80-person jaunt to France
it contracted six months ago, but the operator -- like higher-end
Abercrombie & Kent in Oak Brook, Ill. -- is honoring all
"We're going to lose a bit of money on that transaction, but
we'll eat the loss because it's a good incentives group and we know
next year we'll get two or three of their tours," said Alfonso
Barquin, national sales manager. "Would we really want to charge
them extra now?"
Other operators are getting creative. Austria specialist Smolka
Tours in Tinton Falls, N.J., sometimes tinkers with itineraries to
reconcile bad exchange rates with promised pricing.
"We sometimes take one restaurant meal out or downgrade a hotel
in one city to a lower category to make up the difference," said
president Doris Percht Clark.
"Then agents don't have to go back to clients and tell them
final payment is the 'x' amount, plus another $100."
Are prices right?
Now operators are left to wonder whether publishing prices in
advance is a wise policy.
I.T.S.' Barszap said the agents he deals with expect printed
rates to be a rough guide to cost, even though the bulk of their
bookings are FIT, so prices will appear in his 2004 catalog.
And what about the fine print in those price disclaimers you
find in the back of every tour operator brochure -- don't they
"Even though most operators have a disclaimer in their
conditions, clients don't like to hear it -- though they know it's
there," said Bosco.
There are other options: Luxury specialist JDB Associates in
Alexandria, Va., prints all prices in euros, skirting exchange
And other operators are rethinking their publishing schedules,
putting out smaller, thinner brochures more often or mailing out
addenda with existing materials.
What hasn't happened yet, say operators, is a downturn in
bookings specifically due to the poor exchange rate.
"I don't think the [strong] euro is a deterrent to travel," said
Barszap of I.T.S. "Most Americans are not even aware of it; it's
been camouflaged by other problems."
And United Vacations has not seen "any impact in regard to the
rise of the euro," according to Rob Betz, director of marketing,
thanks to "current affordable prices."
Smolka's Clark agreed, adding that if anything's keeping U.S.
vacationers on this side of the Atlantic, it's the economy. "The
exchange rate is not a factor," she said.
The European Travel Commission in New York is betting on that
status quo, even if the euro continues to pummel the U.S.
Conrad van Tiggelen, director, North America at the Netherlands
Board of Tourism, said the dollar never has significantly
influenced U.S. arrivals in Europe.
"In the early 1990s, when the dollar was low, we saw more
Americans visiting each year."
And operators' now-underpriced packages are shielding clients
from exchange rates.
"We suggest people book though operators because they get a set
package and won't have too many surprises when they see their
credit card bills," said van Tiggelen.