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Friday, January 09, 2004 - Page updated at 10:16 A.M.

Travel Wise / Carol Pucci
Heading overseas? Prepare for sticker shock as dollar sags


FRANCK PREVEL / AP
U.S. tourists should steel themselves for sticker shock if they plan to travel abroad, particularly in Europe, where the value of the U.S. dollar against the euro has declined significantly in recent months.
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Neither the 9-11 terrorist attacks nor the Iraq war kept Redmond residents Jim and Kathleen Bellomo from taking their annual trips to Europe to celebrate their birthdays.

Two years ago, it was a trip to Italy. Last November, they spent two weeks in London, Scotland and Paris.

This year, "we really want to go back to Italy," says Jim Bellomo, 51. "But it looks like we'll go to Asia instead."

It's a different kind of international crisis that's causing the Bellomos to rethink their travel plans for 2004.

"We got killed by the exchange rate," says Bellomo, who says the effect of the weak value of the U.S. dollar overseas really didn't sink in until he arrived home and took a look at some of his credit-card charges.

"Of course hotel and food prices are generally higher in London anyway, but the strong (British) pound and euro made it even worse. It turned a $400 rental car in Scotland into a $500 rental car and some very nice dinners in London and Paris into something much more extravagant than we planned."

With the euro worth 22 percent more against the dollar compared with a year ago, a 50-euro dinner for two that cost $52 a year ago now costs $63.50; a 100-euro hotel room that was $104 now is $127, and a 3.5-euro cup of coffee that cost $3.65 now goes for $4.45 — and that's without counting in price increases or inflation.

"It makes a budget trip to Europe truly costly," says Joe Brancatelli, editor of a Web site for business travelers at www.joesentme.com. "It makes a midpriced trip expensive, and it makes an over-the-top wonderful trip unbelievably pricey."

Partly the result of Bush administration economic policies and interest rates too low to attract foreign investors, the dollar has taken a hit against almost every major world currency including the British pound, Canadian dollar and Japanese yen, as well as some minor ones like the Turkish lira, Thai baht, Australian dollar, even the Indonesian rupiah (although at 8,500 rupiah to the dollar, it's still a bargain).

Predictions are mixed on what will happen next, with most experts forecasting the dollar to further decline early this year before rebounding slightly, and some more bearish forecasters calling for an even deeper plunge.

Looking for value

What's a traveler to do?

Picking a less expensive destination is one obvious choice. Smaller cities usually are less expensive than bigger ones.

Spain is cheaper than Norway; Turkey is cheaper than both; and South America and Mexico are places where the dollar still wields clout.

"A fundamental problem people have is that they ask, 'Where's a good deal?' as if they would go to Ireland because it's cheaper, not necessarily because it's where they want to go," says Rick Steves, European budget travel expert and public television host.

For the Bellomos, Asia makes sense, not only because it's an inexpensive destination, but because they have friends in Shanghai.

Countries in Eastern Europe, such as Croatia, Poland and Slovenia, are excellent values, but more important, their newly emerging capitalist economies and their history and culture make them interesting areas to explore.

"You pay Western European prices for your hotel, but then you eat, enjoy music, beer, Internet access and handicrafts for half the price of Western Europe," Steves notes. "You can sit on the most expensive square in Krakow with a beer and a snack, and it will cost you less than a small Coke at McDonald's in London."

But what if the dream trip you've been putting off the past two years includes Paris, London, Rome or Stockholm?

Americans have to come to grips with the fact that most of Western Europe and many other parts of the world are no longer a bargain and perhaps won't be for some time, says Patty Price, a Seattleite who's been running Patty's Places, a European tour company, since 1984.

"If we want to travel overseas, we will have to accept that and adjust to the situation. It's the way it is, but if you buy carefully, you can still get good value for your money," she says.

"Think about where you're going to stay. You don't have to go to a five-star hotel. You can go to a three-star. Lunch can be simple — go to the grocery store and pick up a picnic. Quite often, if you buy dinner at the hotel where you're staying, you'll get a better deal."

The advice of a few Americans I know who are living in Europe is to be realistic — but also keep the relative value of what you're getting in mind.

"The temptation is still to consider one euro and one dollar of equal value," writes my friend, Jennefer Penfold, who is celebrating her early retirement by living in Paris for six months.

She had to remind herself that the 6.60-euro bowl of onion soup she had at her neighborhood bistro the other night wasn't $6.60 — it was $8.18. On the other hand, the 5.50-euro ($6.82) bottle of Beaujolais Nouveau she picked up on the way home was a bargain by any measure.

So if you're planning a trip outside the United States next year, pad the budget a bit to avoid sticker shock, pay attention to some of the following tips, and keep in mind that after two disastrous years for overseas travel, hotel and tour operators are anxious to have your business.

Off-season travel

One option is off-season travel — always less expensive, but this year, it could make or break your trip. The air fare alone will be several hundred dollars less than the peak of summer, and hotels almost always cut their prices.

Some examples:

ADAM BUTLER / AP
A cyclist passes a large video screen in west London showing the rates between the American dollar and the euro late last month. The dollar is down against major world currencies and at an all-time low against the euro.

• Check into the Hotel Campiello near St. Mark's Square in Venice this month, and you'll pay $127 per night for a double room with a private bathroom and breakfast. In July, the price goes up to $186. Info: www.campiellohotel.it

• Stay three nights at the Hotel Castex, a three-star hotel in the Marais area of Paris, and you'll get the fourth night free through Feb. 25. Info: www.castex-paris-hotel.com

• Book a double room on one of the Radisson Edwardian's 10 London hotels through February, and you'll get a fixed dollar rate starting at $149, including breakfast and a packet of discount vouchers (www.radissonedwardian.com).

Other London deals: www.travelbritain.org

'Soft-dollar' deals

• Look for "soft-dollar" deals, as the tourism industry, especially in Europe and Canada, looks for ways to lure American travelers.

BritRail is lowering prices on basic train passes up to 10 percent to account for the dollar's drop against the pound. See www.britrail.net.

Keith Prowse, a major London theater ticket agent, will reduce prices 10-15 percent this year to combat the drop in the dollar. See www.keithprowse.com.

With the annual inflation rate in Europe running about 2 percent, many hotels are holding the line on price increases. You'll still pay more than you would have last year at this time, but if you're willing to do without the luxury of a private bathroom, you can shave 25-30 percent off the cost of a room.

An example is Vicarage Private Hotel, a family-owned bed-and-breakfast hotel in London with a loyal American clientele (www.londonvicaragehotel.com).

A double room with private bath is 102 pounds, the same as last year, but costs $180 based on current exchange rates compared to $163 a year ago when the dollar was stronger.

If you're willing to share a bath and shower, the price drops to 78 pounds, about $138.

"You can sometimes find travel-related businesses, such as restaurants, travel agencies, tour groups, rental properties, etc., in Europe that are run by ex-pat Americans and cater to Americans," says Rik Thibodeau, an army sergeant based in Vincenza, Italy. "The good thing about them is that you can sometimes pay in dollars."

Packages

Most companies raised the prices on their European tours this year to offset increases in the euro. Still, a package might be worth considering, given the leverage large companies have in negotiating prices.

Bothell-based Gotoday.com (www.go-today.com) and France Vacations Inc. (www.francevacations.net) offer easy-to-book air and hotel packages. But read the fine print: Fees and taxes can add $100-$130 per person to the initial quote. Surcharges for weekend travel add another $50.

When it comes to organized tours, watch for "currency adjustment" clauses built into contracts, meaning tour operators have reserved the right to raise the price if the dollar continues to weaken. Better to sign up with a company that has hedged its bets on how far the dollar will fall and locked in fixed prices.

REI Adventures will offer 25 tours in Europe this year. Prices went up 5-8 percent across the board, according to general manager Cynthia Dunbar. An eight-day hiking trip in Northern Italy's Cinque Terre will cost $2,195; an 11-day multisport adventure in Sicily is $2,295. "We'll stick to those prices," she said, even if the dollar continues to decline.

The currency game

Be smart about use of credit cards, travelers' checks and cash withdrawals from ATM machines overseas.

Now more than ever is the time to call your credit card issuer and ask about its foreign currency conversion surcharge — the amount over and above the official exchange rate it charges you when you make a purchase overseas.

I was reminded of this when I opened my Visa-card statement from Chicago's Bank One recently and noticed a $3.83 "exchange rate adjustment" that brought a $191.29 charge to $195.12.

The amount represented a 2 percent surcharge that the bank builds into the exchange rate as a service fee.

Visa and MasterCard automatically add a 1 percent fee to all overseas credit-card transactions, and everyone with a credit card pays that. In addition, banks, credit unions and other credit-card issuers are free to add their own surcharges — and some go as high as 4 percent. Next time I'll remember to use my other Visa card, the one issued by Virginia-based Capital One Bank, which adds no surcharge.

When it comes to obtaining cash, using automatic teller machines overseas to withdraw money from your checking account back home is still the best way to get the most favorable rate. There sometimes is a fee, but it will generally be less expensive than changing dollars at a bank or private change bureau.

"No matter how you attain your euros, you're going to lose something," says Thibodeau. "But if you're planning on carrying dollars and changing them when you get here, you're really going to get hosed."

Unsure how it all adds up? For fun, call up www.oanda.com, a Web site that helps you calculate exchange rates based on surcharges ranging from 1 to 10 percent.

Talk to other travelers

As always, it pays to rely on the experiences of other travelers.

Check out what they have to say by logging onto a travel bulletin board or online discussion group.

Steves has a "Euro Support Group" on his Graffiti Wall board (www.ricksteves.com). See also Lonely Planet's Web site for ideas on alternative destinations and budget travel (thorntree.lonelyplanet.com), or join a discussion and pick up tips on hotels, restaurants and other finds on TheTravelzine (www.thetravelzine.com/zine.htm).

Carol Pucci's Travel Wise column runs Sundays in the travel section. Comments are welcome. Contact her at 206-464-3701 or cpucci@seattletimes.com.


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