Travelers gain as dollar climbs; fares, room rates fall

Air fares are dropping and the dollar is climbing. Hotel rooms are going begging. For travelers at least, the financial crisis has an upside.

A decline in business and vacation travel is putting pressure on airlines to fill seats as demand for air travel is outstripping cutbacks in flights.

Another bonus: If you're planning a trip to Canada, Europe or Mexico, your dollars will buy more than they have in a long while. The U.S. dollar has strengthened against most world currencies amid falling oil prices and a widening worldwide credit crisis.

Finally, with occupancy down, hotels are offering discounts, especially midweek when business travelers usually fill rooms. Expedia, the largest online hotel booking agency, is cutting its fees.

Consider:

• With the euro at $1.36 compared to $1.60 earlier this year, a 100-euro hotel room in Italy will cost you $136 today compared to $160.

• Lunch at a pub in London priced at 10 British pounds is $17.60 with the exchange rate on the British pound at $1.76 vs. $2 last year.

• Mexico, always an inexpensive destination for Americans, has become even more affordable. The peso plunged to a low of 12.1 per dollar, the weakest it's been since 1993.

• Going across the border to Vancouver soon? Don't settle for an even trade on your dollars. The greenback is now worth $1.10 Canadian, the most since May of last year.

This is good news if you are planning to travel soon and want to lock in a lower price than you would have paid only a few weeks ago.

A few suggestions:

• Hedge your bets and pay what you can in advance if you think the dollar will eventually weaken again; If you think it will strengthen even more, as some economists do, avoid paying too far ahead for anything priced in a foreign currency. One survey shows economists predicting that Canada's currency will slip to $1.13 against the U.S. dollar by the end of 2009.

• Avoid buying foreign currency here too far in advance of your trip.

• Don't look for a price break on tours scheduled for next year — at least not yet. Those prices were set earlier this year when the dollar was at record lows against the euro and other currencies. Tour companies, hoping to recoup losses from this year, will likely stick with their pricing at least in the short term.

Airlines have so far kept fares to Europe at near-summertime peaks for fall and winter, but that may be starting to change.

Eurofly, which flies from New York to Rome, has reduced-price companion fares with the purchase of a round-trip coach fare of $679 including fuel surcharges. Tickets have to be booked by Friday for travel between November 7 and December 14.

"The effects of high fuel costs and the stalled economy is far outstripping the cutback in seats and flights," Joe Brancatelli, the editor of Joesentme.com, an online newsletter for business travelers, told his subscribers today. The 'experts' who predicted that airlines could control prices by depressing capacity were, as always, wrong. History has shown that demand dictates pricing."

Hotels are also feeling the slowdown. In September, domestic hotel occupancy was down 5 percent from the previous September, according to Smith Travel Research.

Expedia is cutting its booking fees on hotels for reservations made by Dec. 1 for travel anytime.

Carol Pucci: cpucci@seattleitmes.com