Busted Buck Plagues Planners

The American dollar's record weakness in key foreign markets has prompted planners of international events to consider their currencies carefully.

At presstime, one U.S. dollar was worth just 0.75 euros, or 104.7 Japanese yen. These exchange rates, which are set on international currency markets, mean that the dollar has lost much of its purchasing power in Europe and Japan. Economists say the situation is mostly caused by the huge foreign trade deficit that's developed as the American economy buys more than it sells to foreign entities. And they estimate that the value of the dollar will continue to fall through the year.

For planners taking U.S. groups abroad, the dollar's sinking status can be ruinous, if measures are not taken to guard against changing currency valuations. Andrea Michaels, president of Extraordinary Events in Sherman Oaks, CA, once lost $30,000 when the dollar's value sunk and she was left holding a suddenly more expensive contract with an overseas supplier. "It was an oversight on our part," the veteran planner admits. "We signed a contract, and then two months later the currency exchange rates changed drastically, and because I didn't have that line item [to lock in exchange rates from the time of the signing], the client said 'too bad.' It took a lot of money out of the program, but it was a valuable lesson." Michaels now protects herself with contracts that specify exchange rates, so that if the value of the dollar goes down, she won't have to pay more for goods or services.

Another approach is to write up contacts using U.S. dollars instead of local currencies. "I try to do that as often as possible," for events in Europe, says Debbie Baker, an account executive at TWI Extras in Las Vegas. But she warns: "You may have to fight for this, because the vendors realize it would probably be to their benefit to charge you in euros," since right now the dollar is losing ground. Other planners say this approach works best with shorter lead times.

Still another tactic is to pay in advance, which negates any changes in currencies. Or consider purchasing local currency ahead of time, as a hedge against devaluation. "I look at the total cost of programs and determine what portion depends on foreign currency," explains Brett Barrowman, vice president of conference and travel management services at American Fidelity Assurance Company in Oklahoma City. "Hotels, food and beverage, and entertainment are all things that have to be paid in the local currency. Usually we purchase foreign currency through our in-house investment department, but you can do it through a bank or currency broker."