Seat 2B By Joe Brancatelli
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A Strong Dollar Is Win-Win for U.S. Travelers
March 19, 2015 -- Happy days are here again: the greenback is almighty around the world and that means lower prices for international purchases such as hotels, ground transportation and meals.
But, wait, there's more: The strong dollar is also pushing down some domestic hotel rates. That's because the newly muscular dollar is scaring international tourists and they're coming to America in smaller numbers than expected. Facing a surprise downturn in reservations, hoteliers in U.S. cities that host large numbers of overseas visitors are trying to fill rooms by cutting prices for American travelers.
Enjoy the win-win scenario while it lasts. In the see-saw world of international currency exchange, victory may be sweet, but it usually is also short. And the return of the Almighty dollar has been a long time coming.
The strong dollar is likely to fuel a wave of overseas vacation travel this summer. Americans, after all, love a holiday bargain, especially in London or Paris or Rome. The impact on business travel is less clear, however. We won't know for sure if more business travelers head overseas until we see how long the strong dollar lasts.
One thing we can say, at least anecdotally, is that the strong dollar is depressing some business and leisure travel from overseas. And that is driving hotel rates down in cities such as New York, Washington and Los Angeles. In recent weeks, I've seen sub-$100-a-night weekend rates at chain hotels in Manhattan and midweek prices far below seasonal averages. Ditto for other U.S. cities that traditionally cater to international visitors.
"A 10 or 20 percent increase in the value of the dollar translates into fewer reservations from overseas," the general manager of one New York property explains. "When the foreigners don't come, I have to lower my rates to fill the rooms they aren't booking. It's not rocket science."
Looking for a fly in this win-win ointment of lower international prices and some cheaper hotels at home? Okay, here's one: the run-up in the value of the dollar overseas could be wiped out if you don't change your foreign-currency behavior.
Business travelers long ago adjusted to the fact that there is a two-tier system of credit cards. Some charge foreign-exchange fees on charges made overseas and some don't. Most business travelers now know to use cards that are fee-free. (Most credit cards aligned to major airline and hotel frequency plans have dropped the annoying charge.)
But another traditional money-saving trick — obtaining local currency on arrival by using your ATM card at the airport cash machines — is getting financially risky. Although ATMs once offered the best exchange rates, that isn't necessarily true now. The reason? The same overpriced money changers who run the currency-exchange booths are taking control of airport ATMs. And they are offer the same miserable exchange rates at their ATMs as they do at the currency kiosks.
At London's Heathrow Airport, for example, Travelex has signed a deal to become the exclusive provider of foreign exchange. The firm already controls about 65 percent of the currency booths and ATMs at Heathrow. Come July 1, it'll be the monopoly provider.
How unfavorable are Travelex rates? According to the firm's website on Tuesday evening, 100 U.S. dollars will buy 60 British pounds and 88 pence. That's a 10 percent off-the-top cut for Travelex since the bank exchange rate on Tuesday evening was 67 pounds and 80 pence.
Travelex's assault on Heathrow is being repeated at other overseas airports, too. "The only ATMs in the Gold Coast airport are Travelex," one business traveler returning from Australia last week told me. "In Sydney, there were others where you check in, but once you got through security, they were all Travelex."
How do you beat this new airport money grab by the money changers?
Before you head overseas, check the ATM locators operated by Visa and MasterCard. They'll tell you whether airport ATMs are owned by a money-changing service or a bank. Even at airports where bank-operated ATMs have been banished from passenger terminals, the ATM finders will show bank-operated machines at nearby airport hotels or on the service roads leading away from the airport.
If you don't have any local currency and must rely on the high-cost airport machines operated by money changers, withdraw only enough cash to get you to the city center. Then obtain walking-around cash at traditional bank ATMs.
Finally, if you think you're going to return to that country, get extra local currency at a bank ATM before your departure. That'll mean you won't have to rely on airport ATMs when you begin your next overseas trip.
Besides, getting currency before you leave is a sound investment. The U.S. dollar isn't likely to be worth much more than it is now. That means you'd be buying local currency cheap and it'll almost certainly gain in value as it sits in your drawer awaiting your next visit.