As the euro reached its lowest level relative to the US dollar in 20 years on 14 July, US tourists now have more of a reason than ever to travel to Europe.
Euro and dollar briefly reached parity
The euro and the dollar briefly reached parity on 14 July 2022, with the euro even falling below $1 that same day. Based on historical figures from currency exchange website xe.com, the move marked the euro’s lowest level since 2002, with its value relative to the dollar declining by 15.5% in the past year. At a time when the entire world is dealing with high inflation, concerns regarding another global recession, and markets rocked by immense volatility driven by the Covid-19 pandemic and the war in Ukraine, the dollar has climbed in value against global currencies.
This means that US tourists will need to put up fewer dollars in exchange for other currencies. According to xe.com, for instance, one dollar would buy EUR 0.98 as of 19 July 2022. This is compared to EUR 0.95 one month ago or EUR 0.84 this time one year ago. While people are eager to travel anywhere, the dollar’s relative strength against the euro may mean that travellers’ first choices are one of the 19 eurozone countries including France, Germany, Italy, Greece, Spain, and Portugal.
Europe is an attractive destination for US travellers
Thanks to the strength of the dollar, Europe has started looking even more attractive for US tourists. Even without the pull of history, culture, gastronomy, and sun and beach offerings, the rapidly devaluing euro, paired with a surging dollar, means that now is the most affordable time for US travellers to head to Europe. Travel from the US to Europe is expected to be 203.6% higher than last year, with international departures to the continent forecast to reach 23.7 million in 2022, according to GlobalData.
Luxury shopping destinations in countries such as France, Italy, and Austria will be particularly attractive to this market. According to one report from Reuters, a US shopper paid $4,000 less for a Hermes Birkin bag in Paris, than it would have cost in the US, thanks to a VAT refund. The weaker euro is also likely to help replace the business lost due to a lack of Chinese visitors, who were a primary source market for retail tourism and luxury sales growth in Europe pre-pandemic.
US tourists must contend with rising airfares
While US tourists vacationing in Europe will see their dollars going further once there, tourists will have to contend with rising airfares. According to Hopper, a mobile booking platform that uses predictive analytics, in June, international return flights were $1,064 on average. In comparison, 2021 saw airfares to Europe drop under $600 for a round-trip on average. The rise in demand for travel to Europe, combined with rising fuel prices, is causing the steep increase in airfare prices. Nevertheless, the favourable conversion rates will take some of the sting off high international airline prices. American tourists may even be encouraged to stay for longer or visit several European destinations as a result, taking advantage of Europe’s extensive rail network or relatively cheaper regional flights.