Much of the discussion at ITB March 4-8 in Berlin had to do with the weakness of the Euro. The confluence of circumstances that need to align in order to grow a mature market like Germany, and Western Europe for that matter, include: a strong economy; reliably miserable weather; an entitlement mindset as to the sanctity of vacation time; and the Democrats in control of at least one branch of the U.S. government. However, a reliably consistent exchange rate that does not fall below (US) $1.20 to the Euro. Of all these variables, of course, the volatility in the exchange rate is more influential than all others combined. The Euro’s plunge, which is approaching near parity with the U.S. dollar, is largely due to market speculation that Greece will exit from the Eurozone and poor economic conditions in Spain and Italy. (To read a daily update currency forecast analysis, click here http://www.euroexchangeratenews.co.uk/euro-to-us-dollar-eurusd-exchange-rate-forecast-to-gain-despite-mounting-potential-for-a-grexit-10091)
Offsetting the concern over the Euro, however, is the sense among both the travel trade and consumers that the U.S. is a safe destination; this is a strong point in its favor, as interest in the Middle East and North Africa–favored destinations among Europeans–has fallen off due to political instability and concern over terrorist activity.
What, exactly, will the impact of a 10-to-20 percent year-over-year decline in the value of the Euro vs. the dollar mean? Carol Rheem, vice president, research & analytics at Brand USA, told a March 12 meeting of the organization’s board of directors that, for every 10 percent decline in the value of a currency vs. the dollar, there is roughly a two percent decline in visitors, which suggests a two-to-four percent decline in visitor arrivals from markets in the Eurozone. “We do expect to see some impact on arrivals for the next year,” said Rheem. “We are expecting lower arrivals.”
A 12-Year Snapshot of Euro-Dollar Exchange Rates
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* Date measured: Mid-day rate on March 16 of each year
Source: Prepared by Inbound per xe.com
One objective of our attending ITB in Berlin this year was not only to determine the trends coming from Europe, but also to understand the impact and the various strategies that different segments of the industry will use should the current exchange rate persist through the Fall and into 2016.
In conversations over a two-day period with a cross section of 40 suppliers, tour operators, destinations and rep organizations at ITB, we offer the following observations exclusively to our INBOUND REPORT subscribers.