Q: I want to take a cheap summer vacation in a foreign country. What are some fun spots where my dollar will go far?
A: The dollar has been weakening against most currencies over the past several years, but there are still some good deals out there — especially in Latin America and Asia.
Countries like Argentina and Costa Rica and cities like Bangkok and Beijing have been popular vacation spots for decades, but over the past year they have experienced big jumps in tourism as the dollar loses its buying power in old European standbys, such as London, Paris and Rome.
Travel booking Web site Travelocity saw travel to South America rise by 7 percent compared to last year; travel to Central America rose 14 percent and travel to Asia rose 17 percent, said Amy Ziff, Travelocity's editor at large.
The Caribbean has also become even more of a vacation mecca, with travel rising more than 20 percent since a year ago, Ziff said.
Part of the reason has been the dollar, which still buys a lot in Latin America and Asia but is weakening in Europe, Canada, Australia and New Zealand. Over the past five years, the euro has gained about 50 percent against the dollar, and the British pound has strengthened by about 30 percent. You'll save money practicing your French in Montreal instead of Paris, but you won't pocket as much as you might think: the U.S. dollar's worth about 1.11 Canadian dollars now.
It's not just the exchange rate in some regions; inflation can give tourists extra sticker shock. Ireland, Greece and Spain saw costs rise more than 3 percent last year, higher than the United States' rate in 2006 of 2.5 percent. The United Kingdom had inflation of 3 percent, and Australia and New Zealand — whose currencies have also strengthened against the U.S. dollar in recent years — saw inflation of close to 4 percent.
A frugal traveler's best bets are places that may cost a lot in airfare, but where lodging and food more than make up the difference. Do the math: it may take an extra $300 to fly to Buenos Aires than to London, but if your hotel is $100 a night cheaper, you're saving money after just a few days. And $40 in the Argentinian city can buy you a fancy steak dinner for two that would cost you twice as much in Europe, Ziff notes.
If you're wedded to Europe, consider heading east, says Amanda Webb of STA Travel Inc., a budget travel agency aimed at students. Travelers hoping for big bargains in Prague might be disappointed, she says — the Czech capital is still cheaper than big cities in Germany and Austria, but its days as a struggling student's haven are over. Better deals can be found in Eastern European countries such as Latvia, Lithuania and Croatia.
Other exchange rate-conscious travelers may want to consider Japan. It's still a pricey destination compared to other countries (Tokyo topped the Economist Group's list of most expensive cities to live in for more than a decade until last year) but the yen hasn't risen against the dollar over the past five years, noted David Durrant, chief strategist at Julius Baer Investment Management. Also, Japan's inflation has been virtually flat, so U.S. travelers who visited there many years ago might be pleasantly surprised to return and find prices haven't soared as they have in European cities.