Weak Euro: Windfall for U.S. Travelers Abroad?

Today’s media are full of reports on the “crisis” in the euro currency. The euro, as most of you know, is the common currency among 17 separate European countries, including all the big ones other than the UK, and what happens to it influences almost all U.S. and Canadian visitors to any of those countries.

The upside for visitors is that European travel costs for U.S. and Canadian visitors are somewhat less than in recent months. Current exchange rates are around $1.30 USD and $1.35 CAD per euro; the U.S. dollar rate is down from an all-time high, around $1.60 in the summer of 2008, and down about 10 percent from $1.45 last summer. If I could predict future currency values accurately, I would have long since retired as a billionaire trader, but futures traders expect the rates to remain about flat through 2012.

Certainly, in the short term, your dollars will go further than the past summer, but don’t get carried away celebrating. You’re most likely to notice the change in hotel and restaurant prices and the costs of local transportation, although even there, price hikes may well erase at least some of the modest advantage.

Shopping? Don’t expect to find Europe a shoppers’ paradise in 2012. Other than some handicrafts and special sales items, European retail prices tend to be higher than those in the U.S. for identical merchandise. That’s because most European countries slap a value-added tax (VAT) on most purchases that the U.S. does not—a tax that’s much higher than typical U.S. or Canadian taxes. Secondly, the U.S. retail system generally adds less markup over factory costs than the somewhat less efficient European systems. Overall, I haven’t been big on European shopping for several decades, and I’m not changing because the euro has dropped a bit.

If you’re looking for a bigger drop, think Switzerland, where the franc, at $1.08 US ($1.10 Canadian) is down a healthy 24 percent from last summer’s high. That reduces Switzerland from unaffordable to just exorbitant. At around $1.56 USD ($1.59 CAD), on the other hand, the pound is down only 6 percent. As with the euro, those drops are good news for visitors but hardly a reason to rush to the airport.

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According to the sources I follow, the one European purchase on which you can find a bargain is a vacation property. I’ve seen several reports of huge drops in property values. If you’ve ever wanted a cottage in some idyllic European countryside or an apartment in the middle of a sophisticated city, now might be a good time to look. But that price drop doesn’t have much to do with recent changes in currency exchange rates: instead, Europe, like the U.S., has suffered a big drop in housing prices that is likely to last quite a while.

The worry for American and Canadian visitors—if any—is the possibility that the European countries will be unable to reach the deals necessary to “save” the euro. I’ve seen very little about what might happen if the deals fail, other than economies and securities markets on both sides of the Atlantic (as well as the Pacific) are likely to face “chaos.” Learned journals are full of such terms as “collapse,” “destruction,” and even “civil war,” with precious few details. As for any U.S. and Canadian visitors who might get caught in a “crisis,” I’m pretty sure you could get out reasonably intact—physically and economically—but your plans could easily be derailed. For now all I can suggest is that you keep your eye on the economic news and be ready with some sort of Plan B for your vacation if the worst happens.

Despite long-term worries, 2012 could be a good year to visit Europe. But the main reason to go remains the same as it has always been: great places to see and exciting things to do; stuff to buy, not so much. Look for the experience, not the exchange rates.

You might also like:

• Destinations to Watch in 2012
• 15 Ways to See Europe on the Cheap
• AAA Predicts Europe Price Spike for 2012 Travel

Seniors on the Go is copyright (c) 2011 Tribune Media Services, Inc.