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.

I'm not sure I agree with the idea of "buy euros now". Primo, you will take a...say 5%...hit now. If the dollar were to go up, you've paid the 5%, and lost whatever opportunity you might have had to get the currency cheaper, later on.

Secondo, by buying now, even if the currency does not move at all, you will have paid more than if you used your ATM card on your holiday.

So buying now is also making an assumption on the direction of the $.

But, I do like the idea of putting the cash, if you have it, in an interst bearing instrument. Currency up, currency down, you have more money to spend.

Lastly, do not look at the exchange rates very day/weekly,monthly. All you are doing is creating tension. You can't control them, so why bother. I also don't watch the weather channel :)

What you can do is...price out what your daily holiday items that will be in euros will cost. Now...add 5%. For me, I plan around 100e for hotel, maybe 100e for meals and misc a day, 200e a day. If the currency moves by 10% (huge), that's 20e a day. Is being in europe going to change because of ~$30 a day. If I was going for a month, maybe. If I feel a little pinch, maybe I'll buy less souvenirs, or have a fresh sandwich for lunch instead of a sit down meal.

I look at it the opposite to some. I'm going, how much $ do I need, if too expensive I'll go off season, take one day from trip,etc..But I'm going, and I don't care what the currency is at.

Note, I'm Canadian, so we've been dealing with a weak currency for a long time.

If people who watch currencies for a living can't predict it 100% accurately, why should I expect to be any better

I will be very interested in the price of airline tickets next year. I don't believe there will be many deals. I tried using my FF miles on American but all the seats were taken. They did have seat availability for 180,000 miles but I refuse to upgrade to business on a 767 out of ORD. It is not worth it to me. The planes are old and the business class section is absolutely worn bare.

"I'm not sure I agree with the idea of "buy euros now"."

I don't agree with it either, but the OP seems very concerned about the dollar continuing to drop. The point about buying Euros now is that the OP has two concerns, the first is securing the rooms, while the second is the concern that (due to a declining $), the room will cost more next year. By reserving the rooms, she has fully addressed the first concern. She should look for the simplest way to address her secondary concern. The point is that prepaying for the rooms is not the simplest method. It ties up her cash and leaves her no flexibility. Buying Euros at least gives her a highly liquid asset and flexibility.

That being said, I think all of this concern over the dollar is going a little overboard, and re-reading, I have this to say to the OP:

Despite your claims that you are not looking for anyone to predict the future, you seem to be predicting it yourself. But don't be under any illusions about what you are thinking about doing and what kind of advice you are asking people to give you. You are basically shorting the dollar. I am not saying this is a good or bad investment, but I have never seen anything on these boards that suggests anyone here is remotely qualified to offer advice on investing in foreign currencies, myself included. Anyone here can offer advice, but are they giving you any better advice than "put it all on black"? Put another way, would you ask the denizens of the Fodor's message board for advice on whether you should invest in Wal-Mart stock? Well, fx trading is even more specialized than stock market investing, so take any advice from an anonymous chat room with a grain of salt.

You should stick with your current savings plan, whatever that may be. If you are convinced that the Euro is cheap right now (which would be the only reason to buy it), then talk to someone qualified about investing in Euros the right way. If, instead, you are concerned that this trip may cost more than you budgeted, be it due to fx or whatever, then you should increase your savings rate, and not try to customize the investment for specific purposes.

Well said TG,

I think it's safe to say that any choice will have the potential of being a good...or a bad choice.

That being said, if the OP decides to lock in by paying hotel in full and stuffing mattress with euros...will she then promise to not look or care about the exchange rates...or will she still keep check to see if she made the right decision.

To me, I think it would seem like a surefire way to possibly ruin holiday by watching as currency fluctuates and do a "I should never have..." Be done with it aand enjoy and plan the holiday..and put few extra GWashingtons into the piggy bank..or in the mattress with the euros :)

morgiesmom, I understand your concerns.

But you should bear in mind that anybody who actually knows the answer to your question (if such a person exists) is unlikely to be dispensing financial advice here, but will be fully engaged in trading currencies -- buying or selling dollar futures.

Think about the issue facing you. In effect, you are talking about becoming, in your own small way, a money market speculator. And whatever you decide, you will be speculating!

Oh come on...I saw on TV late Satuday night a course on trading FX that was computerized so I just had to sell when the arrow was green..or was that red?!:)

I'd nail down the accommodations (and airfare) now.

The dollar will continue to slide as Iraq remains unresolved and oil continues its volatility.

I'd bet on it. In fact, I have, because about half my stock mutuals are in international funds. Up about 30% on the year - and it isn't even Thanksgiving yet.

>so I just had to sell when the arrow was green
Yep, but you don't need to sell, buy and push a button yourself, the computer does everything for you. :D

I'll be visiting the US next week (If they let me in, who knows, they may think all liberals are terrorists... and all Germans are Nazis. I must be overkill for them ;-) )

I've got $134.27 in cash (that's all the $ denominated assets in my portfolio) and 5 credit cards, far better than cash. (One gives 5% on gas.)

The bad thing are those expensive low quality rooms and a few other things like poverty , crime (and dirt).

The GOOD THING are cheap cotton clothing, chinese shoes, big outlet malls, black friday!!!, cans of coke for less than 20ct without any deposit, (drink and trash, yeah! ;-) ), dominos pizza and RIDICULOUSLY low gas prices of about $3.50 per gallon.

I do confess, I love the US of A. :-)

logos, have fun on your trip. Where are you shopping - er, visiting? Maybe you can bring me some euros so I can stock up. What is your exchange rate? :-)

Hey, I work for CBP, I'll to put a good word for you with the guys at the airport.

>Where are you shopping
I'll be arriving at EWR and spend the first night in Easton, PA (going to Easton ;-). Back to Jersey Gardens, up to Woodbury Commons from there west to Ohio, Indiana, Missouri. I've got two weeks altogether. As long as the car doesn't break into pieces, I'll be o.k ;-). (They must hate Germans at National car rental :D My record is a little above 10000 miles in 3 weeks, but that included the Yukon) If it's to cold, Texas is an option. The only problem is, I don't want to stand in line at 5am to get the best deals...