This week, the exchange rate between the euro and the U.S. dollar reached parity, meaning the two currencies are worth about the same amount — a phenomenon that hasn’t occurred in 20 years and one that has big implications for tourists deciding whether they can afford a trip to notoriously pricey countries in Europe.
As of Friday, 1 euro was worth $1.01, a precipitous 11% decline from the start of the year alone and a hearty 14% decrease from this time last year, when 1 euro was worth $1.18. That means U.S. travelers to Europe are saving 14% on their trips compared to if they decided to visit last summer.
“I think this will be a really good opportunity for more Americans to travel to European countries,” Youcheng Wang, dean of the University of Central Florida’s Rosen College of Hospitality Management, told the Washington Examiner.
While Europe has always been a major destination for U.S. travelers given its rich history and cultural proximity to the United States, many people found traveling to another continent where the cost of living is so high and the currency conversion rates so unfavorable to be cost-prohibitive.
The declining euro makes travel cheaper for most of Europe given that the currency is used in 19 of the 27 member countries that constitute the eurozone, which includes such tourist hot spots as Spain, Italy, France, and Greece.
For example, a five-course tasting menu at the Le Jules Verne, perched on the second floor of the Eiffel Tower, now costs about $207. Last year, it would have cost $242, a savings of $35.
A ferry from the historic Italian port city of Genoa to the island of Sardinia this summer for a couple and two children now costs $420 but would have cost, excluding changes in inflation, $72 more in July 2021.
A self-guided tour of the Guinness Storehouse in Dublin now costs two adults $52.46, but last year, those same tickets would have been $61.41.
When one considers just how much travel costs, from food to lodging to transportation, can accumulate, the more favorable exchange rates being experienced across Europe this summer can add up to thousands of dollars in savings over the course of a week or so.
“Typically in travel, a weaker currency attracts people to your country,” said Larry Yu, a professor of hospitality management at George Washington University. Yu predicted that there will be an uptick of U.S. residents venturing across the Atlantic this year to visit Europe given the declining euro.
Yu told the Washington Examiner that travel is largely determined by three factors: motivation, time, and money. All three of those factors are now aligning in a way that is set to mark a boom in people jet-setting across Europe from the U.S.
There is plenty of motivation to travel. After two years of lockdowns and restrictions, there is an enormous amount of pent-up demand to leave the house. In fact, the phrase “revenge travel” has begun to be used by some to describe the sensation of people setting out this summer to make up for lost time and, in a sense, take revenge on the coronavirus for the memories it may have robbed.
People also have the time to take vacations. Because of the restrictions during the pandemic, many workers have accumulated paid time off, and they are itching to use it now during the summer, traditionally one of the busiest travel periods of the year. Many jobs also still offer remote work, which could allow employees to spend time in Europe while still getting work done.
Money is the last factor that Yu cited, and that comes right back to the declining euro. It is worth noting that inflation has caused pain for consumers and, for some, might be curbing their travel ambitions. But for those eyeing Europe, they might see the more favorable exchange rate as an offset for the higher prices.
Many factors have played into the euro’s decline, but a currency’s exchange rate can be seen as a bit of an indictment of the economy of the countries that use it. Europe is facing an unprecedented energy crisis brought on by the Russian war in Ukraine and associated sanctions, and many economists expect a recession.
That means that it is not likely that the euro will begin shooting back up to the levels it was at prior to its decline anytime soon, especially given that the war in Ukraine doesn’t appear to be close to winding down.
Wang said that while forecasting future foreign exchange rates is challenging given the myriad economic factors at play, he thinks the situation in which the euro and dollar are closer in sync will continue into the near future.
“This will not be gone right away,” he said.