DOUG HENSON, senior vice president and chief marketing officer, Shenandoah Life Insurance Co., Roanoke, Va., in advance of a Danube River Cruise incentive program, purchased euros in May 2004 at a price of $1.08 U.S. to $1.00 euro. By the end of the year, the value of the euro had jumped to around $1.33 per U.S. dollar. “It's absolutely amazing,” Henson says.

If the dollar's decline continues, some planners worry that the price of European incentive programs will be too high for their budgets. Richard Granger, assistant director, conference planning, Hartford Life, routinely brings high-level incentive programs to Europe. But his company projects that the value of the dollar is going to decrease to the point that any attempt to go forward with a European program beyond 2006 would “really sacrifice the integrity of the program based upon the continued devaluation of the dollar,” he says.

But while the dollar's decline has some companies rethinking future European incentive plans, the continent nevertheless remains a desirable destination. The disruption in international travel caused by the terrorist acts of September 11, 2001, says Bill Boyd, president and CEO of Sunbelt Motivation and Travel Inc. in Dallas, resulted in an extraordinary amount of pent-up demand for travel to Europe. Judy Jackson, director of industry relations, international destinations, for Maritz Travel in St. Louis, says, “[Despite the shrinking dollar], we still have clients who have the budgets and want to motivate with European destinations.”

Budget-Saving Strategies

Insurance and financial planners are mitigating the heavy costs of European travel with budget-saving strategies. Chuck Lane, director of public relations and incentive travel for Humana in Green Bay, Wis., works closely with an incentive house, Creative Group Inc., out of Appleton, Wis., that is experienced in European travel and that “provides great counsel on issues such as this.” One of the things Creative Group has helped Lane to do is purchase currency futures as a hedge against the risk of price changes, which, Lane says, has “certainly served us well as European currencies fluctuated negatively.” (Purchasing currency futures guarantees a fixed price in U.S. dollars. See the sidebar on page 30 for more information.)

Hartford Life's Granger says that before contracts were signed for 2006 programs to Monte Carlo and the Mediterranean, he took steps to decrease the financial exposure his company faced in booking Europe. “We negotiated a little harder with hotels, particularly in the room rental area,” Granger says. “We got some of that waived, if not eliminated.” Granger has also been more “proactive” in negotiating early with destination management companies to get program details in place for Hartford Life's 2006 European trips, enabling those DMCs to lock in 2005 prices with their preferred vendors.

Contingency funds are a must for European meetings, advises Todd Zint, assistant vice president, meeting planning, NFP Insurance Services, Austin, Texas. Zint has a program going to Ireland and London in 2006 and has recommended a contingency fund of 3 percent to 5 percent to protect against the “currency conversion challenge.” If the dollar weakens further, the company has monies available to help cover the extra costs. And if the dollar strengthens, the company can use the extra dollars to enhance the program.

Another strategy is to consider European hotels that offer guaranteed U.S. dollar rates. For example, InterContinental Hotels, through February 28, offered to guarantee rates of one dollar per one euro at certain European properties. Monaco offers dollar guarantee packages that lock in prices in U.S. dollars through July 2006, depending on the hotel. Claire Dollander, convention and incentive sales manager for the Monaco Government Tourist Office in New York City, says the price guarantee packages make it much easier for planners to sell Europe. Incentive travel from the United States to Monaco, she notes, stabilized in 2003 and 2004 after the disruptions caused by 9/11, and further growth is expected in 2005 and 2006. This rosy forecast, she says, is partly because of the dollar guarantee packages.

Avoiding Future Shock

Worried that a declining U.S. dollar will bust your European incentive budget? You may want to consider purchasing currency futures. Both Chuck Lane, director of public relations and incentive travel for Humana in Green Bay, Wis., and Richard Granger, assistant director, conference planning, Hartford Life, say that their companies have gone into the currency futures market to hedge against the risk of a declining dollar.

With a futures contract traded on an exchange such as the Chicago Mercantile Exchange, the buyer agrees to purchase a specific amount of a specific currency at a fixed price in U.S. dollars on a certain date in the future. When that day arrives, the buyer pays the specified rate, no matter how the currency may have fluctuated.

Locking in a price in advance makes sense if you think the value of the U.S. dollar is going to keep falling against the euro. But there is, of course, always the risk that the dollar could increase in value (and your futures contract would work against you). It's a good idea for your company's financial officers to do some due diligence before deciding that currency futures are a good investment for a future meeting.

For more information about trading currencies, including dollars and euros, go to the Chicago Mercantile Exchange Web site at www.cme.com.