Panel: Euro's price benefits will outweigh conversion confusion

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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 -- The changeover to the euro could lead to a reduction in prices of tour packages and other expenses associated with a trip to continental Europe, providing an opportunity for agents to stimulate sales to the region.

That assessment came during a euro conference panel discussion -- Euro Pricing Panel: Will a Big Mac in Portugal and Germany Soon Cost the Same? -- during which tour operators and a hotel official were generally bullish about the overall impact of the euro on the travel trade.

"The big winner in this is the travel customer," said Ian Taylor, vice president for corporate foreign exchange dealing at Thomas Cook in Toronto. "They are not going to have to pay usurious foreign exchange rates at airports and the rate will be far more competitive."

When the euro is fully phased in during July 2002, separate currencies in the 11 participating nations will be history -- and travelers will no longer have to calculate in francs, lire and deutsche marks. When that happens, wholesalers will realize "considerable savings" by doing away with separate accounts for the various currencies that will be defunct, said Peter McCormack, vice president of sales and marketing for New York-based Trafalgar Tours.

The simplicity could have a direct effect on package rates: Currently, the expenses associated with currency conversions and transfers in a multi-country trip account for up to 5% of the overall price of a travel product, McCormack stated. "Hopefully, we'll pass that on to the consumer," he said, adding that "tourists will be the main beneficiaries thanks to increasing competition among the providers of travel services."

As for agents, the panelists agreed that they stand to reap some of these benefits as well -- and will also save costs when they, too, no longer have to keep separate currency accounts for the euro-zone nations.

But to fully cash in on the phenomenon, travel agents need to become "euro-knowledgeable," and to equip themselves to deal with the transition period -- which begins when the euro is introduced on Jan. 1 -- after which prices may be quoted in both euros and in national currencies denominations for three-and-a-half years.

One of the main selling points to clients, said McCormack, is that "it will be far simpler to travel, since you only to have to take one currency" along on a multi-nation European tour. And that's a benefit that will be appreciated by tourists who have often been frustrated by a confusing jumble of exchange rates and fees every time they cross borders.

If the euro leads to a decrease in travel costs, that could encourage consumers to reinvest the savings in longer or more expensive vacations, he added.

Agents can also create a new opportunity -- touting the advantages of the single currency system to travelers who might have hesitated to travel abroad in the past, said McCormack. "A single currency will make those destinations even more attractive to American visitors, particularly the first-time traveler who has never been to Europe before."

One product, though, will be eliminated by the advent of the euro: the currency packs that include small denominations of currency for a range of countries that can be purchased in advance of the trip.

One uncertainty still hanging over the travel business, McCormack said, is how the transition will be handled in the U.K., which is not expected to join the euro zone until 2002 -- thus putting a question mark over the biggest single market for U.S. travelers overseas.

That means that some U.K. companies may advertise dual prices, listed in both British pounds and euros, in order to better compete with other European nations. The British department store chain Marks and Spencer reportedly is already experimenting with just such a two-tier pricing system.

For the U.S. market, though, the aim is to keep it simple and for tour wholesalers, that means quoting prices in dollars wherever possible. "Realistically, we can only sell a tour product in U.S. dollars," to the American public, said Ravi Rao, president of Jet Vacations. "So we [the operators] carry the risk" associated with changing currency values, he said.

The "negative" for the first year or so into the transition, he said, is lack of certainty over the dollar-euro exchange rate, which won't be set until next month, even though tour operators have already had to publish prices for 1999.

Hotels are also preparing for the introduction of the euro, which will involve training sales and reservations agents and numerous other adjustments in billing and pricing procedures, said Gary Rosenthal, senior vice president of international lodging finance for Marriott International.

He said that Marriott recently conducted a survey of customers and found that many were not ready to receive price quotes or be invoiced in euros. "There are people who are very ready to rock and roll, and other people who will migrate over to the euro over the next two-and-a half-years," he said. "It points out the need to cross train our sales people to be able to deal back and forth between the local currency and the euro."

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  • Ian Taylor, Thomas Cook
  • Peter McCormack, Trafalagar Tours
  • Ravi Rao, Jet Vacations
  • Gary Rosenthal, Marriott International
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