Americans face "new reality" as greenback skids

Letizia Mattiacci won't be raising her rates this year at her six-room farmhouse inn in the hills above Assisi in Northern Italy.

The travelers she counts on most — Americans — are already paying $95 to $120 a night for her rooms, 30 percent more than two years ago, not due to any price increases, but because of the weak value of the U.S. dollar.

Pounded to daily record lows against the euro last year, the dollar has continued its slide against most other major foreign currencies, including the British pound and Australian and Canadian dollar, pushing prices up on everything from a cappuccino in Rome to a dinner in Vancouver and theater tickets in London.

"It's the new reality for Americans," says Seattle travel guidebook author and public television host Rick Steves, whose first trip to Europe with a buddy in 1973 cost $10.82 per day.

Today, Steves says, unless you're staying in a youth hostel or camping, "I would say you've got to figure on $120 a day on average."

When the euro was introduced as the common currency for more than a dozen European countries in 2002, one euro was worth 88 cents, making the price of a 100-euro-a-night hotel room $88. Today, at $1.35 to the euro, that same hotel room would cost $135, an increase of more than 50 percent, simply due to exchange rates.

Estimates vary on how much further the dollar might fall, but almost no one sees any change in economic policies that would trigger an improvement.

"What about the dollar at $1.50?," says Joe Brancatelli, who tracks travel trends for business travelers at www.joesentme.com. "This has nightmare written all over it."

Higher prices at home

Not only are Americans facing sticker shock abroad, prices for hotels, restaurants and tourist attractions in the United States are rising, partly due to more Americans traveling stateside but also more foreign visitors.

"Europeans are streaming into the U.S. because America is SO cheap," said Brancatelli. "Americans who say, OK, let's vacation in the USA this year will be confronted by a market that is jacking up prices."

With 45.5 million foreigners expected to visit the U.S. this year, up 4.8 percent from 2004 and 12.5 percent from 2003, the tourism industry is simply taking the opportunity to make up for losses suffered after the 9/11 terrorist attacks, said Cathy Keefe of the Travel Industry Association, a trade group representing U.S. hotels, tour operators and restaurants.

"We're a bargain-basement destination right now," Keefe said. Average prices for travel in the United States rose 8 percent last year as business picked up. "They'll probably continue to increase this year."

Everything costs more

Meanwhile, even though many hotels and restaurants in Europe are holding the line on price increases, the dollar's slide means everything costs more.

An 8.5-euro ticket to the Louvre in Paris is now $11.50; a 95-pound double room in the Lime Tree hotel near Victoria Station in London is $178, and a 3.5-euro cappuccino in Rome is $4.70.

"If you go over regularly, especially to a particular place, and you note the year-to-year rises, you have trouble accepting it," said Brancatelli. "The value issue smacks you in the face from the morning when you run to the coffee bar for coffee to the last cab ride back to your place at night."

At Mattiacci's six-room Alla Madonna del Piatto, a 20 euro three-course dinner cost $20 in November 2001, $24.50 this time last year and $27 today. If the dollar's slide continues (Some predict $1.40 to one euro before long), the price will be $28.

"This is a very scary subject for a small company like ours," said Mattiacci. "We're crossing our fingers and hope that there are still plenty of people out there who love Italy and will come anyway."

Americans were expected to return to Europe this year in near record numbers after a steep decline following the 9/11 attacks, but the dollar exchange rate is starting to give even some experienced travelers the jitters.

Ann McCann, 58, a member of TheTravelzine, an e-mail discussion group on Yahoo.com and a Fairbanks, Alaska, school librarian, has traveled to Europe every year for the past 10 with her husband, Mike, 62.

Last year they shortened a trip to Germany and Austria to two weeks instead of their usual three, and this summer, they plan a trip to the Canadian maritime provinces.

"Canada just seems like a really good option right now because the dollar is better (than in it is in some other countries), not as great as it used to be, but better," McCann said.

"We looking forward to Montreal and Quebec for their French flavor, and Nova Scotia for great Celtic music."

Still our top choices

Great Britain, Italy and France remain top picks for Americans who travel internationally, but other destinations are gaining favor.

Tours booked through Globus, operator of Globus and Cosmos Tours, are up 35 percent compared with this time last year, but only 10 percent of the increase is coming from European bookings, said marketing director Steve Born.

"We're seeing big increases in North America and South America, and Asia is having a huge rebound."

European tours still account for about a third of Seattle-based REI Adventures' business, said spokeswoman Cynthia Dunbar. The 2005 trips include an 11-day cycling trip through Slovenia and Austria for $2,399 and a $2,299, eight-day hiking tour in Italy's Cinque Terre.

"We haven't shied away from destinations where the dollar is weak," she said, but prices went up 9 percent on 2005 Europe tours and 14 percent for trips to New Zealand and Australia. This compares with a 2 percent increase on trips to Asia and no increase for tours to Africa.

Last year, some package tour operators, like Globus, tacked an exchange-rate surcharge onto the prices published in their brochures.

Right now, Globus plans to "stay the course" with its current prices for 2005, said Born. "We're keeping our fingers crossed that the dollar doesn't worsen."

Europe still beckons

Lots of Americans — more than 12 million in 2005 according to estimates by the European Travel Commission — remain determined to get to Europe despite the higher costs.

Harry and Connie Chittick, Travelzine members from Sherman Oaks, Calif., have two trips planned to Italy and Spain. They're using points from a timeshare to buy airline tickets and are thinking about ways to shave other costs.

"We'll use trains instead of rental cars, have big lunches to avoid costly dinners and look for rooms in smaller towns rather than the local hotel," Chittick said.

"Other than that, we'll take it on the chin and are planning to visit Eastern Europe next summer (2006) instead."

The key is to "cut corners smartly," says guidebook author Steves.

"With the U.S. dollar down, Europe is still affordable, but if your money is tight, you'll need to hone your budget skills."

Steves spent the Christmas holidays in Oslo, Norway, where he has relatives. One night he visited a pasta restaurant in a busy shopping mall where he found that even the locals were scrimping.

"Out of 20 diners, all but three had only tap water to drink. Even the tap water costs money, but $1 rather than $5 for a Coke takes the sting out of eating out."

Carol Pucci: 206-464-3701 or cpucci@seattletimes.com