Dropping dollar makes travel more expensive

Thursday, 6 September 2018

House of Travel says the tourism industry is booming, and it'll take more than a weak dollar to change that.

Expect your holidays to cost a little more in future

New Zealand's dollar is falling against the United States' currency. It neared US74c in February but this week had fallen to US65c.

That means a US$50 dinner at a restaurant in the United States would cost NZ$68 in February but NZ$78 now.

It has also fallen against the British pound, though less dramatically – from 54p last October to 51p this week.

* Expert tips to help holiday-makers get the best deal

Mieke Welvaert: 'The coinciding movements suggest that the exchange rate and tourism are being influenced by the same thing, rather than the exchange rate influencing tourism.'

* If the dollar is dropping in value, how can that be a good thing?**

Against the Australian, it is down from A95c in April to A91c.

While the cost of flights has fallen in recent years, reducing the cost of getting overseas, these fluctuations in the dollar can make your trip more expensive once you get there.

Economist Mieke Welvaert, of Infometrics, said movements in the exchange rate aligned with changes in outbound tourism.

She said, until she looked at the data closely, she would have expected a lag between exchange rate movements and changes in tourist departures – indicating that travellers were watching the dollar before making their travel decisions.

But there is no such delay. 'The coinciding movements suggest that the exchange rate and tourism are being influenced by the same thing, rather than the exchange rate influencing tourism. This influence is likely the state of the economy. When the economy is doing well, people are more likely to be in employment/earning comfortable amounts of money and are therefore more likely to go on holiday. Also, when the New Zealand economy is performing well, the New Zealand dollar tends to strengthen.'

Tourism from New Zealand compared to movements in the dollar.

She said there was more of a lag with travel to Europe, suggesting that changes in the exchange rate with the euro influenced people's decisions to holiday there.

Brent Thomas, of House of Travel, was unconvinced that the currency made a material difference.

'Based on the movement to date, we've seen no impact at all.'

The dollar would have to drop another 10 per cent against the United States before it affected traveller decisions about their activities or spending while they were holidaying, he said.

'If it was to fall below US60c, at the margins some people might say they actually can't afford to go - but it's only at the margins.'

New Zealanders' desire to travel was increasing, he said, and that offset any dampening effect from weakness in the currency.

'As an industry, travel is growing 6 per cent to 8 per cent a year. It's a mature industry where the population is not growing at that rate. It flies in the face of all doom and gloom.'

He said bookings were being made for 2019 in record numbers.

'If you're going to go to Europe and spend $20,000 between two of you, then you're taking spending money, another couple of hundred dollars on your expenses, is that going to stop you? I suggest not. When you're paying that kind of money it's only marginal.'

Economist Cameron Bagrie said the impact on bookings took a while to filter through because airfares and accommodation were usually arranged six months in advance,

'Impact on spending per day is more immediate. Most people tend to have a local currency budget so if the currency moves you either spend more or less. '

Over the rest of the year, he expected the dollar to hold up against the Australian but weaken further against the US. 'I think Brexit and problems across Europe will keep the NZD/GBP and NZD/Eur elevated.'