Americans lured to Europe by cheap airfares are stunned on hitting the ground to find that it costs nearly $20 to see a movie and about $100 for a meal for two in TGI Friday's in London -- without drinks.
With the U.S. dollar at an 11-year low against the British pound, and the exchange rate with the euro almost as bad, a trans-Atlantic trip can quickly empty wallets and pocketbooks -- and transform a monthly credit card statement into a horror story.
“Just looking at the rate here makes me want to cry,” lamented Virginia-native Lisa Adams, as she waited this week at a currency exchange counter at Covent Garden, in central London.
“We knew the dollar was bad, but not this bad,” said Adams, who brought her three children to the British capital for a weekend visit from Germany, where her husband is based with the U.S. military.
Due to the rapid fall of the greenback, even tourists who do their homework in advance are often surprised to find that the dollar, which stood at $1.84 to the British pound on Friday, has depreciated further by the time they arrive.
The pound can also be deceiving.
“I found the prices okay – if the pound and the dollar were one to one!” said Kathy, from Everett, Massachusetts.
Strolling through Piccadilly Circus and Leicester Square, it would be easy to pretend that café and pub prices were written in dollars. For example: a 12 oz. can of Coca-Cola sells for about 1.50. Put a dollar sign in front of that figure and it looks like the price of a soft drink in Manhattan or San Francisco.
“But, if you consider the exchange rate, it’s really high,” said Kathy, who declined to give her last name.
A quick check of the calculator reveals that the soda will set you back about $2.75.
“We had no idea it would be this expensive -- we’ve been doubling everything,” said Tanya Boyd, a power company employee from Mississippi.
“The most shocking thing was food. Even for a small breakfast it cost us 40 bucks,” said David Boyd, who flew in from Baghdad, Iraq, for a week’s vacation with his wife.
Jordan Backman, a New York City lawyer said, “You can pretty much get anywhere by cab in Manhattan for $15 max. It seems like that is the minimum for London taxis.”
Another tourist noted that renting a car was not a wise alternative as it cost him more than $80 to fill up the tank of his mid-size rental car.
Instead, most tourists end up hopping on the underground subway, which costs £2, nearly $4, for a one-way ticket within central London.
And smokers beware: Cigarettes cost around £4.50, or $8.25, a pack.
Fewer euros for your dollars
After a relentless rise during the 1990s, the dollar began its downward turn in 2002 and has fallen rapidly in recent months.
Americans travelling to continental Europe, as well as Britain, have been hit hard by the decline.
“When I got here it was $1.13 to the euro and now it’s $1.34 in some places, which is terrible,” said Joseph Cavise, one of thousands of young Americans who study in Florence, Italy, each scholastic year.
The euro, the currency used by 12 European countries, was introduced with approximate parity to the U.S. dollar in 1999, and had fallen below the dollar by 2002, when the first euro notes and coins were issued. But, with the dollar’s depreciation, the exchange rate on Friday was about $1.27 to the euro.
“If you go to a restaurant and spend 50 eurosyou’re spending closer to $75. That’s something that you don’t really think about -- but it’s pretty tough,” said Cavise, a history major originally from Chicago.
Cavise, speaking by phone from the Italian tourist hub, added that although he enjoyed going to nightclubs he couldn’t afford the hefty 20 euro entrance fee, let alone the 8 euro drinks.
The 20-year-old said that although he did not need to work during the fall semester, the higher cost of living had forced him to “get a job with the school and another job bartending – without them I couldn’t make it here this semester.”
The fall of the dollar had an especially negative impact on students who relied on U.S. grants and loans, Cavise noted.
Further decline predicted
Although the U.S. administration says it stands by a strong dollar policy, a weak greenback is expected to aid President Bush’s re-election bid as it helps U.S. producers compete abroad.
“If it doesn’t go too far, it will presumably stimulate the U.S. economy. But, if one overshoots to the point it becomes very uncomfortable for Americans who want to import foreign goods or take foreign holidays, it may be a more ambiguous benefit,” said John Williamson, senior fellow at the Institute for International Economics, an influential Washington-based think tank.
The tourist industry in Britain and the European Union, already seriously damaged by the Sept. 11, 2001, attacks, the war in Iraq, SARS, and continued terror alerts, is now nervously watching the dollar's fortunes.
While exchange rates are difficult to forecast, Williamson said, “If the dollar overshoots on the weak side as we overshot on the strong side in the past then there’s a long way to go yet.”
Predicting that the dollar could reach 2 to 1 with the British pound and $1.60 to the euro, Williamson said that the EU's central bank would likely intervene to reverse such gains.
However, “unless they get American co-operation, which it doesn’t look like they’ll receive, a single currency influence doesn’t usually have much effect,” he added.
European tourist industry re-thinks game plan
As the American tourist industry profits from Europeans taking advantage of the weak dollar with weekend shopping sprees in New York, its European counterparts are quickly concocting ways to lure in Americans despite the exchange rate.
More Americans visit Britain than any other European country, according to Elliott Frisby, press officer for VisitBritain, the United Kingdom’s official tourist bureau.
Americans are coveted as “they are the most important market due to what they spend here,” he said, stating that although Americans comprise around 15 percent of the total number of visitors to the U.K. each year, they account for over a fifth of all expenditures.
Frisby said it was fortunate for the United Kingdom that the strong euro has prevented Americans from switching their holiday plans from Britain to other European countries.
“The close relationship with the U.S. has also kept us in good stead,” he said, adding that Prime Minister Tony Blair took part in an advertising campaign aired in the United States.
“More Americans are likely to come here than Paris,” said Jamie Talmage, business analyst for VisitLondon, the official visitor organization for London. “I guess you could say it’s fringe benefits of the war (in Iraq),” he quipped.
On his way to a meeting entitled “Dollar and euro; where we go from here,” the Italian Government Tourist Board travel commissioner in New York, Eugenio Magnani, said, “I would like to know myself where we go. There’s an economic privilege (for the U.S.) to keep the dollar this way – we have the [U.S.] election in November so it will likely last until then.”
However, Magnani remained upbeat, stating that, “'Travel and Leisure' magazine readers have chosen Florence as the most desirable destination in Europe for the third year running, followed by Rome and Venice, and Sienna comes seventh. Four out of seven is amazing.”
With Alitalia and Delta creating more routes to Italy from the United States, and more tour operators becoming specialists in Italy, “there’s the perception that the market is getting stronger,” he said.
At an upcoming conference in Venice, Magnani hopes to encourage Italian suppliers not to increase prices, and to convince tour investors that Italy is still “good value for money.”
Money well spent
Even if they return home broke, most American travelers still appear satisfied with their time spent in Europe.
Cavise, the Chicago-native studying in Florence, would agree with Magnani that Italy is still “good value for money.”
“For as expensive as I say it is (to go out to dinner in Florence) considering that the food is excellent it isn’t so bad.”
In London, Lisa Adams said, “It’s not a good time to visit but it’s such a cool city.”
Elliott Throssell, a 21-year-old international business student, offered his advice to other Americans planning to come to the city: “Don’t pay too much attention to the exchange rate or you’ll spend all your time converting prices in your head and miss experiencing a great world capital.”