You won't believe your calculator if you figure this one out. But nice ribbons!
Currency exchange rates can make a huge difference in prices where you are going. Travel prices fluctuate a lot because of this and the exchange rate can take a country from a decent value to being way overpriced in the case of just a few years. It’s happened to Australia, Brazil, Canada, and South Africa most recently, and plenty of others before that. Here’s what to keep an eye on in the current roller coaster climate of global finance.
At least consider a package deal for a short trip
The only true way to protect yourself from currency fluctuations, really, is to buy some kind of package deal in advance that removes all variables. You pay one price for everything (or close to it) and you don’t have to worry much about rates on the ground once you get there. It’s one of the main reason some people like cruises: they know everything they’re going to get and roughly how much it’s going to cost them. No adventure, but no surprises either.
If I were advising a relative on a vacation to Europe anytime soon, I’d definitely tell them to get a package tour. Ironic and annoying as it may be, that bundling often makes it cheaper than being an independent traveler: the tour agency is negotiating lower group rates on flights, hotels, transportation, and meals. I can do better than them in a cheap country by being smart, but it’s tough to do better in an expensive one that requires a long flight, like Italy, Japan, or Australia. (For example, Budget Travel’s website recently listed a 7-day tour of Copenhagen and Stockholm for $1,187 from NYC per person: flights, fuel charges, hotels, breakfast, and taxes. Try working that out on your own.)
U.S. dollar vs. Swiss franc, past two years
Avoid Switzerland for now
Switzerland has never been a bargain, but suddenly it’s up there with Japan for the title of most expensive destination. That’s because the inability for the U.S. Congress to act like adults when managing their budget led to a downgrade of U.S. debt. (Despite what some think, all budgets have two sides to the ledger: spending AND revenue.) That left the Swiss franc as the only currency looking rock solid. Which means lots of countries and investors are buying Swiss francs by the bundle. In a big country, this wouldn’t matter, but for tiny Switzerland, it’s a disaster. It’s made the value of their currency rise by a third.
Check out this PlanetMoney podcast if you want the whole story, but the bottom line is an already expensive place just got crazy expensive. Ski elsewhere this winter.
Where have we been before?
It makes lots of sense to check historic exchange rates here. Thailand has been at 40 baht to the dollar and it’s been at 30. Your perception of what a screaming bargain this country is will be a whole lot different depending on what the rate was when you were there. When I first visited Canada many years ago, 70 U.S. cents bought one loonie. Now they’re at par, with the Canadian dollar slightly higher as I write this. Some things already seemed expensive at the lower rate—like cigarettes, music, books, restaurant meals, and beer. So imagine how it feels now. On the other hand, Mexico at 12 pesos to the dollar felt a whole lot better than the first time I went there, when it was 10 to the dollar. If the rate is good now, or if it’s going through some crazy up or down move that’s out of the norm, you’ll know what to do, based on how badly you want to go there right now.
Are they tied to the dollar?
As noted in this recent post on how you would think Africa would be a cheap travel destination, but it’s not, where the currency is pegged to matters a lot. If it tends to follow the euro, that’s different than if it follows the dollar. This matters in Africa, it matters in the Caribbean, and it matters in Asia: in all these places one country may be following the Euro, while one right next to it may be following the dollar or even the pound sterling.
Which brings us to Latin America. It used to be that all these countries moved in lockstep with the U.S., so the rates barely budged. That’s still true in some that use the dollar (Ecuador and Panama) and others that might as well, they track it so closely (like Honduras and Belize). There are a few outliers though, resource-rich countries with booming economies that are floating their own boat on the international exchanges, most notably Brazil and Chile. It’s been a good while since either of those were a bargain—though Chilean wine remains a fantastic value. And you should have lots of Brazilian music in your collection, of course.
Overall though, in a world of uncertainty, these are your best bets for stability for those making their money in U.S. dollars. These economies are strongly tied to the U.S. and their people are getting lots of remittances from relatives working there. Huge spikes or declines in the exchange rate don’t do anyone any good. So “steady as she goes” seems to be the mantra. You won’t get any big nasty surprises going to any of the Latin American countries profiled in The World’s Cheapest Destinations.
Here’s a chart on Argentina though, for comparison purposes. It’s not as dramatic as it seems if you look at the change in percentage terms, plus inflation there has eaten up much of the gain. And now the government is charging you $140 before you even leave the airport. Even factoring in all that though, it’ll certainly cost you far less than the country profiled in the other chart above. That’s really the key point: keep it all in perspective because the cheapest destinations will usually still be a better value than the most expensive ones, no matter what kind of European meltdown, Asian currency crisis, or political posturing in the U.S. is going on.
Dollar vs. Argentine peso, past two years