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Home / Money / Calculators /  Falling rupee playing spoilsport with foreign holiday plans

The holiday season will be here soon, and those who want to go on a foreign trip would have started the planning process. One of the main aspects in that is planning the finances. We fix a budget, and then work around it.

A factor that can play spoilsport is currency fluctuation. The rupee has depreciated 7.5% against the US dollar since January last year. On 28 January 2016, rupee was at around 68 to a dollar, a level last seen in August 2013. In March 2015, rupee was at 61 against the US dollar.

Also, analysts say that the domestic currency can become even more expensive in the short term (http://bit.ly/1OwZiDe).

Against the British pound, the rupee is at around 99, and against the euro it is at about 77. In March 2015, rupee was at 92 against the pound, and 74 against the euro.

What this means is that Indian travellers will now have to fork out more for their holidays, or spend less.

A recent survey conducted by travel portal Yatra.com found that when the rupee was at 61 against the dollar (in January 2015), about 89% of the 2,000 respondents surveyed were planning on going on a foreign holiday. But now, when the currency is at 68, only 33.8% plan to do so. In general, whenever there is currency fluctuation, about 60% hold back their travel plans until the rupee becomes more stable.

“We have always seen a change in Indian travellers’ behaviour with the fluctuation of the rupee. The impact inevitably happens on international travel, where travellers not only change their choice of destination but also look at compromising on accommodation to stay within their budget. With people planning and booking tickets for summer vacations soon, their original choices are likely to get affected if the rupee continues to fall like this," said Sharat Dhall, president, Yatra.com.

One such traveller is Priyanka Koijam, a Mumbai-based communications manager with an automotive company. She is going to the Philippines for a 10-day holiday with her mother in March, and has a budget of little above 2 lakh. “Since I am going with my mother, I was planning to book hotel rooms that were more on the expensive side. But now with the dollar getting more expensive, we might have to settle for cheaper accommodation," said Koijam. She said she is not going to increase her travel budget, but will plan the holiday in such a way that it fits the budget.

There are many countries, such as the Philippines, where you will have to convert rupees into dollars and then convert it into the local currency.

The Yatra survey found that when the rupee was at 61 against the dollar, almost 50% of the respondents were looking at upgrading their hotel accommodations. And now, at 68, 43% plan to opt for budget accommodation instead.

What you can do

Just because the rupee is depreciating against the dollar, it does not mean that you can’t go for the holiday that you had planned. There are ways you can cut costs. “Though we have not seen people changing travel plans due to the dollar becoming more expensive, what is happening, however, is that people are cutting down elsewhere; opting for cheaper accommodation, and reducing number of days of the holiday," said Anil Khandelwal, chief financial officer, Cox and Kings Ltd.

As mentioned above, there are travellers who are opting for budget accommodation. You could do the same. Instead of staying in a hotel, opt for cheaper alternatives such as bed and breakfasts, homestays, budget hotels and others. According to Hotel Price Index by Hotels.com, for January-June 2015, the average cost of a 4-star room in London would be £140 (13,800) a night. A room in a 3-star hotel would cost £102 (10,060). In New York City, a 4-star hotel room will set you back by $276 (18,768) a night, and for a 3-star, it costs an average of $227 (15,436).

Bed and breakfasts cost lesser. For instance, according to Airbnb.com, the average cost per night for a private room in London is 8,449.

As the rupee depreciates against the dollar, expenses such as sightseeing, local transfers and food will increase. What you can do is see if you can find more economical means to travel. For instance, see if travelling by a budget airline is cheaper than taking a train. For example, an airplane ticket on Easyjet from London to Paris for 14 March costs 3,772, while a train ticket on Eurostar on the same day costs 7,175.

Or, if you were planning on driving cross-country in a rented vehicle, check to see if going by train is more economical.

If the depreciating rupee has hurt your travel budget too much, you could choose to go to a country where the currency has fallen more against the dollar than the rupee has.

The Yatra survey found that at the current level of the rupee, people prefer to go to destinations such as Thailand, Singapore and Malaysia. “For summer holidays, we are seeing a lot of interest towards countries in the far east and even South Africa," said Khandelwal.

Since this is just the start of the year and there is still some time before the holiday season starts, do factor in currency fluctuations into your travel budget. Try to keep some amount as buffer against future exchange rate fluctuations.

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