Action on dollar poses costlier - but more dependable - travel

Six finance ministers left behind some happy people when they departed from Paris after their meetings this past weekend. The hopeful smiles belong to just about any European who has anything to do with tourism. The agreement by the United States and five of its economic allies to help stabilize exchange rates at ``around current levels'' could mean that, for the first time in at least two years, people can actually make some dependable spending plans before going to Europe.

If the agreement holds through the coming spring and summer travel seasons, you will be able to make spending plans now and not have those plans destroyed by a sudden, deep shift in currency exchange rates.

``The removal of this uncertainty is a positive stimulus,'' says James V. Cammisa Jr., publisher of Travel Industry Indicators, a Miami newsletter. ``I think it will be a stabilizing influence.''

While exchange rates will be more stable if this agreement stands up, the costs of ``doing Europe'' will definitely be higher than a few years ago.

``It's more expensive this year than it was last year, and last year was more expensive than it was in '85,'' notes Richard T. Scott, president and publisher of Fodor's, the travel guides. ``I don't know how significant the agreement will be, but it will help the American traveler going to Europe.''

The falling dollar does not seem to have hurt travel to some other destinations, including Australia, Japan, and the Caribbean, Mr. Scott says.

If the currencies do stabilize, it will be good news to the European travel industry, shaken on two fronts last year: the falling dollar that made it too expensive for many Americans to visit, and concern about terrorism.

The latter problem was showing signs of improvement toward the end of last year, industry observers say, and a more stable dollar will just make things that much better.

Not everyone is sure the dollar will remain stable.

``I still see a weakening US dollar,'' says Michael Daranay, a financial planner in Miami. He does not think the weakening will be as great as in recent years, however.

``Any changes won't even be as much as 8 or 9 percent, '' he says. ``More like 3 or 4 percent.''

While tourists are probably no match for a finance minister, currency trader, or financial planner when it comes to predicting the direction of the dollar, there are steps they can take to get the most out of their currency and keep the need for forecasting to a minimum.

``When people come in and make arrangements for independent [non-tour group] travel, we suggest they prepay as much as they can,'' says Laurie Knorr, manager of the Travel Mart, a travel agency in Wilmette, Ill.

Recently, she says, a customer was urged to prepay for his hotels in Europe. ``He said, `No, I don't think the dollar's going to fall any more.' In the next three weeks, it did go down,'' she recalls.

Prepaying, especially for hotels, also means you have to carry that much less in cash or traveler's checks. It also means you don't have to pay a hotel bill with a credit card.

While credit cards are convenient, they should be used only as a last resort. In the US, when you charge something on a card you know what the charge will beon the bill a few weeks later. But if you charge something in Europe, your charge slip has to travel back to the US and through the banking system before someone here converts the amount of the purchase made then into dollars now.

If the dollar does not change or moves up, you will be ahead; if the dollar falls, you lose.

On the other hand, if the choice is between using a credit card to buy a valuable souvenir or spending some cash or traveler's checks you might need later, the extra cost could be worth it.

Whatever the direction of the dollar, some basic rules about saving money on currency exchange still apply.

Don't buy too much foreign currency in the United States before you leave. You won't get the best rate. Still, you'll want some cash, say $100 or so, to pay for a taxi from the airport abroad to your hotel and to meet other expenses in case you arrive late at night, on a weekend, or anytime the banks there are closed.

Try to take most of your additional money in traveler's checks. While these checks offer the security of replacement or refund in case they're lost, they may also give you a slightly better exchange rate than you could get with cash. Foreign-currency traveler's checks are another option. They're fairly easy to get in the US, and they are often accepted at some places where US-denominated checks might not.

The best place to turn your traveler's checks into cash is the local commercial bank, or the office of an international travel service like American Express or Thomas Cook. If you are looking for a bank, be aware that many European banks have very short hours by US standards and some may be closed on a weekday, often on Mondays.

The worst place to convert dollars is your hotel. It's nice to know you can exchange a little bit of money at the hotel desk late at night if you have to, but the extra premium charged for this service will quickly teach you to avoid this option if at all possible.

Try to bring back as little foreign currency as possible. You lost a little when converting from dollars into the local curency; you'll lose again when you change back into dollars. And unless you want more souvenirs, don't bring back any coins. While most US banks will, for a premium, exchange bills, they won't bother with coins, although some currency dealers might take a few of them off your hands.

If you have a question that would make a good subject for this column, please send it to Moneywise, The Christian Science Monitor, One Norway St., Boston, MA 02115. No personal replies can be given. References to investments are not an endorsement by this newspaper.

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