Dollar Dive Dims Plans

A few months ago, things were beginning to look up for many countries in Europe and the Middle East. But that was before the dollar began its stunning swan dive.

Americans had been booking their 1988 vacation plans, and there were strong indications that travel to Israel, Egypt and Greece would be way up. Trips to Europe were on the upswing, too.

During the first seven months of 1987, the number of passengers carried on North Atlantic air services jumped more than 20% over the same period in 1986. In October, TWA announced that all of its “Getaway” tours to Egypt had sold out for the rest of the year.

The travel industry responded quickly to what seemed to be very good news.

A number of cruise lines that had moved their ships away from the Mediterranean after the Achille Lauro shipjacking in 1985 were considering a return. Royal Viking Lines, Royal Cruise Lines and Cunard decided to return.

sh Increased Bookings

“We’re positioning every ship we have back there,” says Mercedes Miranda, vice president of sales for Sun Line Cruises, “because we know it’s coming back. 1987 caught us by surprise in terms of how many bookings there were. For us, the increase was between 500% and 700% over 1986. We turned away business. We think Americans have recovered from the psychological impact of terrorism.”

The statistics seem to bear this out.

Greece made a big comeback in 1987--a 35% increase in American tourists over the year before. During the first six months of 1987, U.S. tourism to Israel jumped 47% above 1986 levels. This year, as Israel celebrates its 40th anniversary, that percentage is expected to soar.

In Egypt, bookings for tours of the pyramids on Cairo and Nile cruises are going fast.

“It’s come back in a big way,” says Robert Cazian, president of R & H Voyage, a Glendale company that specializes in Middle East tours. “For us, 1986 was disastrous. During one month we booked only 19 people to Cairo (the company normally averages 350 passengers a month).

“In 1984 and 1985, the R & H catalogue ran 48 pages. Two years later, the same catalogue was just eight pages. But now Americans are finally coming back. We expect the first quarter of 1988 to be up 89% over 1986 figures.”

The new Semiramis Inter-Continental Hotel in Cairo is running at high occupancy levels, and bookings are strong at the newest hotel operated by Hilton International--Fayrouz Village Sharm El Sheikh, a diving and beach resort on the Red Sea at the southern tip of the Sinai Peninsula.

Travel Plans International has announced a reduction in the cost of its 11-day “Kingdom of the Pharaohs” trips. In 1987, the trip, which includes Cairo, Aswan, Luxor and a Nile cruise, was advertised for a base price of $1,775 per person. This year, the tour begins at $1,480.

Some projections have been so strong that Egypt Air plans to begin flying 747s twice weekly between Los Angeles and Cairo in May.

A number of airlines are also bullish on the Mediterranean.

Pan Am was hard hit in 1985 and 1986 by American tourist reaction to terrorism and the Russian nuclear accident at Chernobyl. But the airline enjoyed strong traffic to Europe last summer.

“We anticipate a 10% to 15% increase in traffic this summer over 1987,” says Pan Am spokesman James Arey. “However, the non-controllable factor is the fluctuation of the dollar.”

Significant Impact

To be sure, the drop in the dollar threatens to have a significant impact on travel abroad this summer. And all previously positive bets for a U.S. travel boom across the Atlantic are off.

“It started last summer when the dollar started to fall,” says one Paris hotelier. “When the U.S. stock market fell Oct. 19, things went from bad to worse. The immediate effect on our business from the United States was staggering. Room bookings dropped, and our restaurant business fell nearly 40%.”

At the same time, prices soared. A Big Mac in Paris now costs twice as much as a Big Mac in Kansas City.

The French franc wasn’t the only currency buoyed by the decline in the dollar. Spain and Portugal, for years considered bargains, are no longer such good deals.

Things aren’t much better in England. Already expensive hotel rooms in London that were running $240 a night in September now cost nearly $300.

Some hotels have discussed dropping rates to keep their U.S. reservations, but many hotels feel they have already reached a point of diminishing returns.

While air fares to Europe and the Middle East have not risen dramatically, there is no guarantee that they won’t. But it’s not the air fares that present the real problems--it’s the cost of travel once you land.

Trips Too Expensive?

“The scary thing,” says one London hotel manager, “is that we could soon reach the point where it is not financially feasible for us to drop our rates further, and even at that point it will be too expensive for the Americans to come at all.”

Last year, Inter-Continental hotels in Europe did a survey, trying to discover the threshold dollar exchange-rate point beyond which Americans would not cross. The critical point rested at $1.74 U.S. for one British pound. At this writing, the pound is at $1.85 and rising.

Still, advance U.S. bookings for London hotels are strong for June. But June is traditionally a strong month for London, what with the Wimbledon tennis championships and Ascot horse-racing meets.

“But we’re worried about July and August,” says one manager. “That’s when it could get very tough. If the dollar keeps dropping it will trigger a new period of isolationism in the United States, and the Americans will stay home.