The euro is here. On January 1, 1999, 11 members of the European Community* started keeping track of transactions in the euro as well as in their local currencies. By 2002, all transactions in the 11 countries are expected to be conducted in euros. What will this mean for meeting and event organizers?
* Transparent pricing--"Customers will be able to easily compare costs of hotel accommodations...throughout Europe," says Gebhard Rainer, director of finance for Hyatt International Hotels Europe. Price differentials will be even more obvious on commodities such as coffee and soft drinks. North Americans, who already look at European currencies through the prism of the dollar exchange rate, won't feel the change as much. But their European counterparts will. Some experts predict that there will be a leveling effect on prices--where hotel rooms are currently a bargain, prices may rise; where they are expensive, prices may fall.
*Cheaper currency exchange--Even at the beginning of the transition, local currencies will be exchanged based on their rate against the euro, and the euro's against the dollar. That means meeting executives need only pay attention to the euro/dollar. This will create backroom headaches for banks as they adopt this "triangulation" method of valuing money, but overall transaction costs should be reduced, especially for meetings in more than one country. Transaction costs will not be eliminated--banks are unlikely to stop charging altogether for these services.
*integrity--"The introduction of the euro does not constitute a reason to break a contract--or any other legal document--and the regulations address issues such as continuity of contract, the conversion of currency, interest rates, and rounding," according to a statement released by the euro-conversion team at IBM Europe.
"Any contract signed prior to December 31, 1998 for products or services delivered after January 1, 2002 will still be payable in the local currency," says Mark Brun,director with Hyatt International. "But that are signed after the beginning of 1999 will be payable in local currency or euros."
Any contracts that involve escrow accounts or make reference to interest rate benchmarks are going to be a problem. Companies who have provisions for rates of inflation in their contracts can expect disputes over this issue.
* Uneven timing of euro adoption--A recent report from Micros-Fidelios, a Bahamas-based provider of hotel management systems, claims that only 50 percent of the hospitality businesses in the affected areas have decided when they'll change over to the euro. Whilecompanies are likely to be ready immediately for euro-denominated transactions, local companies are not.
"When you go down the ladder to local suppliers, they are not ready," comments Hyatt International's Brun. The same goes for local, independent hotels. "It will be easy enough for you to pay your bar bill in euros, but not everyone is ready to give itemized bills denominated in the euro."
Lynda Boylan, spokesperson for Amadeus, a Madrid-based global travel distribution service, suggests that the hospitality industry should come up to speed. She predicts: "Corporations will adopt the euro more quickly than many travel service providers, for reasons including reduced commission and bank charges, and also because they will enjoy greater certainty in financial planning and consolidating cross border operations. We recommend that hotel properties adopt the euro as quickly as possible, as business acceptance of the euro will be quicker than many imagine."
Bjorn Hanson, New York-based global hospitality group leader of PrivewaterhouseCoopers' Financial Advisory Services practice, notes that a single currency will be particularly attractive to the meeting segment of the lodging business.
For more information about the euro, visit the European Monetary Union's euro Web site at http://europa.eu.int. Another useful site is www.ih-ra.com, home of the International Hotel-Restaurant Association, which has a task force on euro conversion.