Dollar buying ever less of world's goods

The dollar has fallen 5 percent against the euro and the pound so far this year, the equivalent of a 20 percent annual decline.

from the May 21, 2007 edition

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Overseas, the change is already forcing Europeans to adapt. In Torri, Italy, Il Colombaio Bed and Breakfast, which is nestled at the edge of a walled medieval village in Tuscany, used to be filled with Americans – more than 90 percent of guests. But this year, only a handful have come – less than 5 percent.

"It's amazing," says Sumito Barabara Viale, who has run the B&B for nine years. "It dropped because of the euro. It's so expensive to come here now."

Hoteliers, shopkeepers, and restaurateurs across Tuscany are experiencing a similar dearth of American tourists, Ms. Viale says. They've been replaced by English, German, and even other Italian visitors. The change first became apparent after 9/11, when many Americans opted to vacation closer to home. After recovering a little, the number of American tourists began to drop steadily as the euro gained strength against the dollar.

Travelers say their higher expenses are not just due to exchange rates. Lily Blitstein, who is planning a trip to London to visit her fiancé, recounts her search for affordable airfares. "Prices jumped $200 in 10 days' time," she says. "I guess it's the price of fuel and everything else."

Travel agents say many Americans who still want to go to Europe are opting for Eastern European countries, where many of the hotels and cruises are priced in dollars. "Our bookings to Poland and Russia are up 100 percent. To the Czech Republic, they're up 143 percent," says Mike Pina, manager of public relations for AAA in Washington.

River cruises on the Danube are so popular this year that they are nearly sold out for September and October, says Adriane Greene, president of Welcome Travel Agency in Lake Ronkonkoma, N.Y. "I know companies are already planning to bring ships to Europe for next summer," she says.

The pressure on the dollar is squeezing the profits of many European businesses. Steve Jenkins, who buys olives and cheeses for Fairway Market in New York, says he's been able to hold off on price increases because his European suppliers are absorbing the currency change. "I do feel cosseted by my European artisans," he says.

For Australian visitors to America, the lower US dollar also makes a difference. Clover Moore, the lord mayor of Sydney, who was recently visiting New York for the first time, says prices in the Big Apple seem quite reasonable.

• Alexandra Marks contributed to this report. Material from the Associated Press was also used.

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