Barnett on Business Travel
POUNDED BY THE POUND
IN PRICEY BRITAIN
BY CHRIS BARNETT
June 24, 2004 -- Here's an instant seminar on currency trading any business traveler can understand: A martini at a popular cocktail bar in London set me back $25 and a night in a stylish hotel there can cost you a lot more than a roundtrip economy ticket to England.
The U.S. dollar, weak against the British pound for years, is not quite on life support now--but it's close. At the currency-exchange window at a Lloyds Bank in Plymouth, England, a 10-minute walk from where the Pilgrims set sail for America, one pound cost me $1.98. And this is a bank, not some pricey hotel where only a naïve tourist or time-crazed executive willing to pay for the convenience of instant cash would swap their dollars for sterling on a two-for-one, take-it-or-leave-it basis.
England bound without a CEO's expense account? Pack your bank ATM card and make sure you have a hefty balance in your checking account. As long as it has an interbank network logo on the back of the card, you can make a cash withdrawal in pounds and will probably get the best possible exchange rate. It's currently around $1.82 to the pound.
Three money-saving caveats: First, ask your bank beforehand if it charges a withdrawal or transaction fee. They can run from a $4 to $6 fixed fee to 3 or 4 percent, a deep bite if you're converting a big block of U.S. dollars. If your bank does levy a fee, ask for a waiver. Most smart banks won't nickel-and-dime a good customer. Second, steer clear of the privately owned ATM machines you see in pubs, restaurants, hotels and virtually everywhere today. You'll get an extremely unfavorable exchange rate. Third, never, ever get pounds by taking a cash advance on your credit card. You'll be hit hard with fees plus a towering interest rate that could hit 30 percent depending on the card issuer and your credit rating.
What's a great rate as of late June? Werner Antweiler, associate professor at the University of British Columbia's Sauder School of Business, quoted $1.82 per pound as the "wholesale" exchange rate. But that rate is limited to currency conversions of a minimum one million dollars. "If you can get $1.88 per pound today, that's probably OK," he suggests.
Laments Antweiler: "There is absolutely no transparency for the public on charges and fees. That's the biggest problem in currency exchange today."
Travelex, the world's largest currency exchange, touts something called the "price promise." A traveler can buy foreign money online, pick it up at the airport when they land and be guaranteed the best rate that day or Travelex will pay the difference. The catch: it only makes that promise to British travelers, not to Americans. Okay, but are the exchange rates great? I called the San Francisco downtown branch of Travelex and was quoted $1.97 to the pound. Worse are the exchange counters at airports where a combination of fees and commissions are charged to cover their staff and airport-concession expenses.
Frequent travelers to Britain never repatriate their pounds for dollars when leaving. They keep a stash of sterling for the next visit. That's not only convenient, but it also saves the exchange fees. The savviest U.S.-to-U.K. commuters have a London bank account and profit as the dollar devalues.
Swapping dollars for pounds is actually the easy part. Paying the pound price for goods and services with your 50-cent dollar can take your breath away. My handcrafted, birdbath-sized martini at the hip, sophisticated Blue Bar in the Berkeley Hotel was 12 pounds and 50 pence. That included 17.5 percent VAT, but not the tip or service charge, which is not out of line for cocktails in London today. But as a dollar-denominated Yankee, that excellent drink was $25! The Wyndham Great Eastern Hotel on Liverpool Street charges 250 pounds--or roughly $500--for a standard room.
The antidote? Ratchet down, shop hard and spend creatively. New York documentary filmmaker David Adler visits London regularly, but avoids restaurants Instead, he buys prepared foods at Marks & Spencer or Waitrose, scoops up French wine at Nicolas and dines in most nights. "It's more fun," he says. "Wines are actually better and a good bargain in London." Adler "plays the ticket" deals on American Airlines and Virgin Atlantic and hops around London on the double-decker buses rather than cabs.
Many London hoteliers have teamed up with VisitLondon.com, the official London tourist Web Site, to offer extremely reasonable prices. The popular London Hilton on Park Lane is offering a $150-a-night rate on some dates. The exclusive five-star Athenaeum Hotel in Mayfair has dropped its rate from around $340 a night to $160 nightly. And Radisson Edwardian Hotels is offering some real bargains: Rooms at its central London hotels start at $160 a night including VAT and an English breakfast. The catch: You must stay a Friday, Saturday or Sunday. So read the fine print.
Some final tips: Get your pounds in London rather than in the British countryside. Country banks and ATMs charge a steeper rate because it is costlier to process the smaller batches of U.S dollars they take in. And try to pay cash when you spend. Credit cards slap on their own hidden "transaction" fee and your statement may not reflect the prevailing exchange rate the day of your purchase. Besides, if the dollar keeps sinking, you'll pay more in 30 days when your bill is due. And if you carry a balance, the interest on your London shopping is a painful double penalty.
This column originally appeared at JoeSentMe.com.
Copyright © 2001-2004 by Chris Barnett. All rights reserved.