Travel&Vacation

Seniors on the Go

Hotel chains and tour operators often promote foreign prices, especially in Europe, as “guaranteed dollar rates.” The implication, of course, is that all guaranteed rates are somehow a good deal. That’s not the case: What matters is the actual rate you pay, not the guarantee. In Paris, for example, a guaranteed hotel rate of $300 USD a night is a good deal when the going local rate is €300, but a bad deal if the going local rate is €200.

Some guaranteed rates are, in fact, good deals. In recent years, I’ve seen several hotel chains in the U.K. promote rooms at the same number of dollars as the local rate in pounds, and I’ve seen similar deals in France with euros. At today’s exchange rate of around $2 to the pound, I don’t expect to see any such promotions this year, but you might well see some in euros. And guaranteed rate promotions aren’t confined to one-for-one currency unit deals—any guaranteed rate well below the going local rate, after conversion, is a good deal.

When guaranteed rates pass the “good deal” test, the reason hotels and tour companies offer them is to entice U.S. travelers with reduced prices, while continuing to charge regular prices to locals and visitors from other areas. You usually see them in periods when the U.S. dollar is weak (like now) and when tourist traffic from the United States seems to be slowing. The main disadvantage is that the better deals are usually confined to relatively expensive hotels and tours. Suppliers at the budget end usually don’t have enough pricing room to make such offers. And you can usually reduce your expenses more by going down-market than by getting a modest break on higher-priced services.

But when the guaranteed rate is not substantially below the going rate, after conversion, and after a possible senior discount, you might well ask, “What good is the guarantee?” Basically, a dollar guarantee locks in the current exchange rate. And such a guarantee on a price is valuable when—and only when—the value of the dollar is falling against the currency in which the supplier normally sets its rates. If the dollar drops steeply between the time you reserve and the time you pay, the guarantee protects you against paying more than you expected. Promotions often pitch, “Save money if the dollar sinks even more.”

What those promotions don’t tell you is that you “Lose money if the dollar rallies.” That’s why, to me, a guaranteed rate that isn’t substantially below the going rate, after conversion, is a deception or even a minor scam.

In recent years, exchange rates for the dollar have changed only slowly against the pound, euro, and most other major currencies. Over the typical hotel or tour prepayment lead time of a few months, the amount you’d gain or lose with a guarantee would be pretty small, either way. Moreover, if you’re really convinced the dollar will continue to drop, you can “guarantee” the dollar price of any purchase simply by prepaying it at the time you reserve. And if you’re really certain the dollar will slide, quit whatever job you have now—or come out of retirement—and start making a bundle as a currency speculator.

Clearly, with guaranteed dollar rates, it’s the rate, not the guarantee, that matters. Whenever you see a guaranteed dollar rate, first check the current price in local currency along with a possible senior discount, and take the guarantee only if it’s lower. If it isn’t lower, worry about guaranteeing today’s rate only if you’re convinced the dollar will drop.