Traveling in a troubled economy

By Ed Hewitt

updated 11:14 a.m. ET Oct. 16, 2008

Even as American taxpayers bailed them out, executives of AIG enjoyed a $440,000 spa getaway to the decadently luxurious St. Regis resort in Dana Point, Calif. If those guys think travel seems like a good idea now, who are we to argue, right?

Actually, that could well be the case. While the still-unfolding global economic meltdown may seem like a major threat to your next vacation, the news may not be all bad. If you are careful, plan for contingencies, pick your travel dates well, take a sensible vacation and look for the bright spots on the travel horizon, you can do very well at the moment — even if not "billion dollar bailout baby" well. Here are my tips on where to look, and where to look out, when planning your next trip.

Reality check yourself
Your first consideration, obviously, should be your own financial situation. Many of us need and deserve a vacation, but nothing says you need a full-on splurge for a stay in a luxury resort (even if you are a bailout recipient) or a week on a private beach. Even the high costs of a trip to The Mouse (Disney World, that is) might stretch your budget to a breaking point if the current financial situation gets any worse — or if it starts affecting our day-to-day life more than it does in the immediate moment.

If you are inclined to irrational exuberance about what you want and can afford in a vacation, taking a hard look at what a vacation actually costs you can sometimes be a good exercise. Thus, I recommend you ...

Do a travel budget
If there was ever a time to do a proper travel budget, this is it. Most travelers I know tend to do a quick accounting of the big expenses — airfare, hotel, car rental, park or attraction admission — add them up, and call it a budget. However, in a classic case of lots of small costs adding up to big expenses in the end, the less obvious costs incurred while traveling can turn out to be the actual budget breakers. Toward creating a more accurate budget, remember to research and include the following when planning:

• Parking at airports or attractions
• Attraction entry fees
• Activity costs such as bike rentals, scuba lessons, boat rides, etc.
• Hotel tips and parking where necessary
• Rental car gasoline
• Pricey airport and theme park meals
• Internet access
• Cell phone roaming charges
• Travel insurance
• Equipment rentals such as child seats, strollers and the like

Need help? Check out our cool new Travel Budget Calculator.

The U.S. dollar
While most Americans worry that each dollar won't have as much clout at the local grocery store, it turns out that our currency will do much better internationally than it has in some time. Currently at $1.36 against the euro, the dollar is the strongest it's been since summer 2007.

An improving exchange rate directly decreases the toll of those day-to-day expenses that can pile up during overseas travel. These are some of the costs I outline above in the budget section — things you purchase on the spot in local currency, and which thus actually get cheaper when the dollar picks up a little strength.

Tip: As exchange rates fluctuate, sometimes updates on rate quotes in U.S. dollars on items like hotels and other fixed price purchases can lag. That is, just because the dollar is doing better this week does not mean that the hotel you hope to book has adjusted their USD price quotes or updated their Web site — chances are that those rates are exactly the same as they were a month ago. When booking hotels, if the hotel offers a USD rate, compare it to the current exchange rate to see how it stacks up, and ask for a better rate if you appear to be taking a hit.

Gas prices down
As of this writing, national gas prices are pegged at around $3.40 per gallon, down 25 cents from a month ago, over 70 cents from the July 2008 high and even almost five cents from October 7, just a day earlier! That said, prices remain up considerably compared to just one year ago this week, when a gallon averaged $2.76. So you are still worse off than you were at this time last year, but gasoline prices are not quite the bank breaker that they were just a few weeks back.

Airfares likely going up? Ask again later
As I predicted in this space this past summer, immediately after Labor Day the airlines cut back considerably on available seat miles. Most of the big domestic airlines reduced capacity in the 7 - 12 percent range, including upstart airlines like JetBlue, which eliminated just under 12 percent of its capacity. The putative reason for the cutbacks was to save on costs, but the real reason was the hope of creating a supply shortfall while demand remained steady, allowing prices to climb.

The airlines weren't, ahem, banking on a massive financial collapse, however, and it now seems inevitable that demand will in fact fall, as both leisure and (most critically) business travelers become more cautious with their money. Business travel in particular will be hard hit, as companies struggle merely to stay alive. It is very hard to predict at present whether the airlines will actually be able to increase fares, or if they were just lucky, in a sense, that they cut capacity right before all of their customers were likely to curtail travel dramatically.

Video   Cutting the travel budget Oct. 10: Robert Katz of Vail Resorts weighs in on how travel is impacted by the current tough economic times. CNBC

One special note: If you have been researching airfares lately, you may have noticed the return of the dreaded Saturday night stay requirement. The airline practice of charging more for flights that depart and return inside the same work week, which had largely fallen by the wayside the past couple of years, has recently returned with a vengeance.

If you can book your flights to include a Saturday night stay, you may find significant savings — I have seen fare drops in the $400 - $500 range simply by including a Saturday night stay. This may in fact be good news for leisure travelers, who usually include at least one weekend in their itineraries; it is less so for business travelers. Note that we may see this pricing practice scaled back once again if businesses curtail employee travel considerably.

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