If your family is like mine, you may be in the habit of vacationing in the same stateside location summer after summer. There is a lot to be said for sticking with what’s familiar – locales where you know you will find amenities that everyone has enjoyed in the past and would likely enjoy again. However, this may also be the year to take a trip abroad.
With the strength of the dollar and a lower cost of oil, there may not be a better, more affordable time for you to enjoy a vacation in another country.
The dollar has strengthened in recent years against major currencies, which allows your money to go farther when spent overseas. The dollar was a bit stronger against the euro in March, when it almost reached parity with the euro. The dollar hasn’t traded in parity or one-for-one with the euro since November of 2002. The dollar has fallen a bit since March, but a euro still costs you only 1.2 dollars. That is still a significant decline from 2011, when a euro would cost you almost 1.5 dollars. So what does that mean for travelers? Everything you would buy in euros – a hotel room in Venice, a museum ticket in Paris, or a pint in Ireland – is a lot cheaper this year than it has been in quite some time. In fact, currency moves alone have reduced the costs of a European vacation by almost 25% from the cost of the same trip just a few years ago.
What is causing the dollar to increase in value against the euro? There are many factors, but in simplest terms it all comes down to supply and demand. In America, most are expecting the Federal Reserve, after years of increasing the money supply, to begin to raise interest rates and decrease the money supply. Because of the sluggishness of economies in many European nations, the opposite is expected there. As dollars become more scarce and euros become more plentiful, the value of the former rises and the value of the latter declines.
It isn’t just in Europe that great travel deals can be found. The dollar has increased against the Japanese yen, the Canadian dollar, and most other world currencies, as well. So whether you are traveling north, south, east, or west, you are likely to find prices significantly lower than they would have been just a few years ago. If your travel plans are flexible, though, it pays to compare. For example, although the dollar has been strong against the British pound, the differential isn’t nearly as great as it is with the euro. So, while the UK is still cheaper this year than in previous years, travelers can get a greater relative currency savings by exchanging their dollars for euros by visiting countries on “the continent.”
One might expect the decline in the cost of oil to contribute to savings of international travel this summer and autumn, too, since fuel is about thirty percent of the average passenger airline’s operating costs and is trading at almost half of its cost just a couple of years ago. Unfortunately, those savings aren’t making their way to the consumer. Strong demand for international travel (a result of the lower cost) is allowing the airlines to keep their prices high this year. So cheaper oil is allowing the airlines to make greater profits, especially during the busy summer travel season, but the traveler is expected to incur even higher costs here than in years past. It certainly makes sense to shop around when it comes to airfare. Traveling at less popular times of the day, making an extra stop enroute, and traveling after the kids are back in school may further reduce the cost of your particular trip.
Depending on the size of your party, when you travel, and the amenities you will prefer on your trip, savings from currency moves alone may make traveling abroad cheaper this year when compared to the same travel itinerary in previous years. The savings are worth checking out if you have had an interest in travel outside of the United States. If the dollar doesn’t maintain its relative strength against other major currencies, you may never have a better opportunity to travel abroad.
» Mark Blackwell is a Certified Wealth Strategist® and the Mississippi Area Executive for Regions Private Wealth Management. He can be reached at email@example.com.
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