Americans Still Flock to Europe as Dollar Drops
HEIDELBERG, Germany — A day after Michael Kingsley arrived in this romantic university town, he was in no mood to savor the cobblestone streets, the half-timbered houses, or the flower-bedecked windows — to say nothing of the camera-ready castle on the hill.
Mr. Kingsley had left his camera battery and charger in a hotel room in London, and he knew that as an American tourist, buying replacements here was going to sting. The damage: $143. Back home in Falls Church, Va., he said, the same purchase would have set him back no more than $100.
For Americans visiting Europe this summer, the steep decline of the dollar against the euro and the British pound has made eye-popping prices a lamentable part of the traveler’s tale. (The Kingsley family’s hotel room in London was $500 a night; five bite-sized chocolates at Harrods cost $10.)
“It’s O.K.,” said Mr. Kingsley, 59, with a resigned laugh. “I’ll just have to work a few extra years to pay off this vacation.” His wife, Laura, did her best to soothe him. “It’s just play money,” she said.
By now, five summers after the dollar began its long swoon against the euro and the pound, American travelers are used to $5 cups of coffee and triple-digit dinner checks in Europe’s great capitals. But the dollar’s latest plunge — to record lows of $1.38 to the euro and $2.05 to the pound — has turned mere sticker shock into a form of disbelief for many tourists.
For Kaelon Kroft, a custodian from San Bernardino, Calif., it was the cost of Coke that shocked him most in Paris. “We just paid 9.50 euros for a can of Coke at a cafe,” he said. “At our hotel, the bar was serving a glass of Coke for four euros.”
“That’s over five bucks,” his wife Kristi added. Actually, at the current exchange rate, it is a fizzy bubble or two over $5.50.
The Krofts and the Kingsleys both scaled back their European holidays to limit the pain of the currency pinch. But neither family seriously thought of canceling their vacation, and their glass-is-half-full determination to make the best of things was echoed in interviews with American tourists from Ireland to Italy.
It is also reflected in the tourism statistics in France, Germany, Spain and other countries, which show that the number of Americans visiting Europe has increased this year, even as the value of the dollar has eroded. Travel experts say this speaks both to the resilience and rising affluence of American tourists, as well as to the perennial appeal of Europe as a destination.
“Americans who visit Europe tend to be more educated, with higher incomes, so they are less affected by the exchange rate,” said Joachim Scholz, a researcher at the German National Tourist Board. “Even backpackers have more money than they used to, if you look at the price of hostels.”
Americans purchased $3.8 billion worth of travel-related services from European countries in the first quarter of this year, a 5.5 percent increase from the same quarter last year, according to the Bureau of Economic Analysis. They bought $22.8 billion of travel services in 2006, nearly 10 percent more than in 2002, when the dollar was close to parity with the euro.
That should be a relief to innkeepers and restaurateurs here, since many currency experts say the dollar — pulled down by the combination of a persistent trade deficit with the rest of the world, a slower American economy and an unexpectedly vigorous Europe — has not reached bottom against the euro.
Ashraf Laidi, chief currency strategist at CMC Markets in New York, described the dollar’s decline as “pervasive.” He predicts that it will trade at $1.42 to the euro by the end of 2007. The outlook for Americans in Britain is better: Mr. Laidi thinks the dollar is close to its nadir against the pound.
Across the Atlantic, the weaker dollar has encouraged a European travel boom to the United States. And the currency changes are spurring a shift in trade, with American exports to the rest of the world picking up even as European officials are becoming louder in their complaints that the cheaper dollar is undermining the global competitiveness of their manufacturers.
In the last 12 months, the dollar has declined 8.9 percent against the euro and 9.9 percent against the pound. But the erosion has been most dramatic over the last few weeks, after many Americans had already booked their European trips. Most appear to have held on to their bookings.
“A lot of Americans purchase their packages in the U.S., and pay in dollars, so they don’t even notice,” said Thierry Baudier, the chief executive of Maison de la France, the French tourism board. “Once they arrive, it’s too late.”
Mark Trotter, a high school teacher from Fresno, Calif., taking 27 students on a tour of Madrid and Barcelona, said he watched with alarm as the dollar sank in the last two weeks. But nobody pulled out of the trip, which he leads each summer, and he said this was his largest group ever.
“I remember doing this trip for $2,100 as recently as 2003,” Mr. Trotter said, standing beneath the stone columns in Madrid’s main square. “This year it cost $2,800. But in all honesty, parents don’t even blink.”
To be sure, tourists are making some adjustments to their itineraries or their spending habits. Paris has increasingly become a weekend destination for American tourists, Mr. Baudier said, reflecting a trend toward shorter European vacations.
In Ireland, a group of students from Virginia opted to skip a visit to the Waterford crystal factory, 100 miles south of Dublin. They are also cutting back on casual purchases like snacks or coffee.
“I have to be much more aware of looking at the price of everything,” said Erin Rogers, 21, still marveling at a $22 plate of Irish stew she ordered the previous evening. “I didn’t have a clear compass of just how weak the dollar was. It was a crash course in global economics.”
The Krofts decided not to extend their stay in Paris, as they had hoped, because of the cost. Next year, Kristi Kroft said, their family of four would probably go to Hawaii or the Virgin Islands, where a dollar is worth 100 cents.
Mr. Kingsley, a strategic planner with the Army Corps of Engineers, had plotted a grand tour of Europe that would have taken him, his wife, and their 33-year-old son, Josh, to London, Paris, Rome and Vienna, before ending up in Germany, to attend the wedding of a family friend.
As the dollar wilted in recent weeks, Mr. Kingsley crossed off one city after another, eventually leaving only London and Germany. “I would have loved to go to Vienna,” Mrs. Kingsley said sadly.
The currency squeeze is toughest on Americans who live in Europe and are paid in dollars. They suffer from erosion in their real income that, in many cases, is not fully compensated by their employers.
Jennifer Aquino, who lives in Madrid and manages international alumni relations for Bentley College in Waltham, Mass., said she felt the pinch shopping for groceries, paying her rent, or going out to dinner.
“It’s scary,” Ms. Aquino said. “It makes you think twice about if you want to keep building a life in Europe.”
Maddine Insalaco, who runs a landscape-painting workshop in Tuscany with her husband, Joe Vinson, said business had been crippled because their costs were in euros while their revenue was in dollars. “It’s a mom and pop operation,” she said. “We’re too small to hedge our risks in terms of foreign exchange.”
Worse, most of their clients are American, and as the euro has spiked, enrollment has dwindled. The dollar has lost about half its value since they first started teaching more than a decade ago, but “we can’t increase our prices by 50 percent,” she said, because they would lose even more business.
Still, Ms. Insalaco and other Americans are philosophical about the vagaries of currency markets. “When the dollar was strong, no one was complaining,” she said. “We cashed in then.”
Among some, there is even a sense that turnabout is fair play. Linda Miller, a frequent visitor to Europe from Honolulu, was browsing the other day in the gift shop at the National Gallery of Ireland in Dublin.
Recalling how she and her husband Stephen, an eye surgeon, had lived large on earlier trips to Europe, Ms. Miller said, “We have always thought that America got away with something.”