By 2002, all transactions in the European Community will be conducted in euros. What does that mean for you?
On January 1, 1999, 11 members of the European Community* began tracking 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. Here is how event organizers in the U.S. may be affected:
* Transparent pricing: "Customers will be able to easily compare costs of hotel accommodations . . .throughout Europe," remarks 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 as their European counterparts. Some experts predict that there will be a leveling effect on prices across Europe as a result.
* Cheaper currency exchange: Local currencies will be exchanged based on their rate against the euro, and the euro's against the dollar.
That means U.S. planners need pay attention only to the euro/dollar. This will create back room 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 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. Says Mark Brun, director with Hyatt International, "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. 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 that 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.
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 formed a task force to deal with the euro conversion.
*Austria, Belgium, Finland, France, Germany, Italy, Ireland, Luxembourg, The Netherlands, Portugal, and Spain are the 11 countries that are adopting the euro as a common currency.