USA $ dropping, pay hotels in full now or later????
 

I'm going to paris, venice, florence and rome next summer. I've booked the rooms and made the necessary deposits. Every day I check EUR to USA rates on CNN and it keeps getting worse. I'm considering contacting the B&B's/Hotels and asking if I can prepay all the rooms in full now. One or two offer 5% discounts for cash, but what good is that if the rate increases every day? Am I crazy to consider doing this? Has anyone else considered this? I would pay with either Amex or Visa. Thanks.

I would do it now. However, there are some hotels that will charge you if you cancel, so you should get trip insurance.

There was another recent thread on this. The bottom line is, there's no guarantee what the currency is going to do. You could as easily go bad with this "investment" as do well. If you are that sure of the currency situation, there are various investments you could do. In any event, you could put the money in a savings account that would earn several percent.

"Checking the rates every day" has no bearing at all on what the rates will be next summer. The € could be even higher - or the central banks could lower interest rates sending the € lower.

I would pay asap. Look at the charts, the trend is clear und unchanged.

>Look at the charts, the trend is clear and unchanged.<

I did that once. Followed the charts for 5 years prior to my visit.

The USD always rose in the Winter and fell in the Summer.

The Winter before my Summer trip, I bought foreign currency for each of the countries I planned to visit.

The USD continued rising for the next 18 months, and I lost about 5%.

You cannot predict what will happen next Summer.

((I))

I wouldn't pre-pay, but then again, I wouldn't have even paid a deposit this far in advance. As others have said, there is probably nobody on this board qualified to predict interest rate movements between now and next summer.

The only way is down, baby :D

I'll post a "told ya so" next summer, if I find this again next year. ;-) Only trying to save you money. However, the hotel may be out of business by then, who knows.

okay, you asked, so I'll say you are crazy to do that.

How much do you possibly think it can fall between now and next summer? How much would that savings be, and what are you going to do to ensure all those prepayments -- take out travel insurance in case you need to cancel or can't go for some reason, which will probaby cost more than you'd save.

Why don't you say exactly what your big fear is -- you think the USD could drop 20 pct by next summer, is that it? Because even 5 pct obviously wouldn't make sense to do all that. It's true that if you prepay now (and pay the bill, I hope you wouldn't pay interest on that), you'd be losing 6 months interst on that money compared to it being in a bank. They don't pay much now, but I have some money market accounts that pay about 5-6 pct per year. So that's 3 pct you'd lose right there.

Well, you are going to very expensive cities to begin with. A 5 or 10 percent increase is not going to matter much. There is a lot of strong currency floating out there these days. The dollar is just not one of them. I would book your rooms now with the minimum deposit. I am going this summer as well and 2 of the places I wanted to stay were already filled. So I believe the demand is there and that was verified by seating availability on my flights. As far as the dollar rebounding before next year I would have to agree with Logos. It doesn't seem like a short cycle. But if you prepay now you run the risk of forfeiting your money because many things could happen before the summer. It's a risk you have to take if you want to go anywhere popular.

Thanks for all the opinions.

Logos999 & Leburta- We think alike. Apparently there isn't many of us! I appreciate you trying to save me $. (ditto for my husband.)

Janisj - I was under no illusion that by "checking the rates every day" I was infuencing the fall of the American dollar! I was HOPING things would improve!

Ira - you are always kind. Thank you.

Travelgourmet - I'm finding hotels I wanted already booked.

Christina - I appreciate you actually saying you think it's crazy. I do have travel insurance.
If I knew how much it would fall I wouldn't be wondering. (I'd also be rich!) I have NO PROBLEM saying I think the USD could drop big time.
(I thought 20 pct was an interesting number though.) That's why I asked for others thoughts on this. NO I wouldn't pay any interest. I pay my credit card(s) off each month in full. Just playing the mileage game. I hadn't thought of the money market idea though - just tie it up for 6 months. Maybe a CD. Thank you for that.

Copain - so you too are in the same boat for next summer. Good luck to you too.

The title of this wasn't "Fortune Teller Wanted"! I didn't expect anyone to predict the future!

Thanks again for taking the time to give me your thoughts.

Morgiesmom

I didn't mean (and didn't imply) that watching the rates daily would influence future rates.

I meant - monitoring current rates will tell you nothing re the rates next year.

It is pretty clear that the dollar is trending down and will probably continue in that direction, but...all the experts on foreign currency agree on only one thing - that it's impossible to predict what will happen in the foreign currency markets.

>all the experts on foreign currency agree on only one thing
Well, no, it's just the opposite. Any bank makes forcasts about the future exchange rates based on economic data. You never know all the factors, because some are "random", based on individuals descisions and thus unpredictable. But the models give you a result on how the exchange rate may be with a certain likelyhood. This is everyday business. The economic data of today an the past is a base for predictions of future changes. i.e. if the deficit needs a certain influx of foreign investments to keep the $ from sliding, you can make assumptions on how long foreigners a willing to buy american assests, calculating the risk that they may not get their money back (which has to be compensated through higher interest rates).

Calculate your total trip cost. Put this sum in a short term CD or MM account. The interest earned will probably cover any drop in the value of the dollar against the Euro. Can you buy Euros now? Negotiate directly with your hotel.

Regardless of next summer's $-€ exchange rate, prepaying hotel bills seems a bad idea to me.

GSteed has a good idea when suggesting you put aside your hotel money in an interest bearing account. Here in the UK it is possible to deposit money in euro accounts to hedge against fluctuations in the £ - is there a similar provision in the US?

For the record (I'm sure logos will remind me if I'm wrong) I'm guessing the $ will make a small recovery by next summer.

Put half your money into an interest bearing account and with the other half buy Euros now.

>You cannot predict what will happen next Summer.

I misspoke.

Anyone can predict anything.

You cannot know what will happen next Summer.

For example, although the DJI has been rising for the last 5 years, if you bought into the market on Oct 1, you would have lost about 7% by Nov 11.

However, the DJI rose 320 points yesterday.

So, will the Dow be up or down in 3 mos?

((I))

Well said, ira. You can make a major financial mistake by using history as a predictor of the future.

"Regardless of next summer's $-€ exchange rate, prepaying hotel bills seems a bad idea to me."

This is exactly the right way to put this. If you are concerned about a declining dollar, then buy Euros now (even if I think playing currency trader is not a good idea). If you do this, you will be in a better position, by getting your Euros (potentially) cheaper AND getting the 5% cash discounts. There is nothing to be gained by paying the hotels and potentially losing your money if something goes wrong.