Travel season is here and many snowbirds – who tend to be on fixed incomes – are feeling the financial pressure from the low loonie. In addition to the rising price at the pumps, expensive groceries and used cars at home, the cost of travel has spiked for U.S. destinations. As most snowbirds reside part time in the American Sun Belt, this has caused many to rethink their travel plans, either cutting their spending, or cancelling their winter trips altogether.
Related Read: Travel in Canada Grows Due to Weak Loonie>
When we look at the currency exchange rate, it’s not hard to see why many Canadians feel this way. Back in 2011, when the loonie was actually higher than the U.S. dollar, exchanging CND$1,000 would have pocketed you U.S.$1,050, but the Canadian dollar has been on a downward spiral ever since then. Last month exchanging CND$1,000 would have only gotten you only US$680. That’s a drop of US$370 in less than five years – ouch!
Why has the Canadian dollar fallen off a cliff? Plunging oil prices can take most of the blame. The loonie, nicknamed the “petro dollar”, seems to follow oil prices in lock step. With a barrel of oil at about $27 and not showing any signs of recovery, it doesn’t look like the loonie will be on the rebound any time soon.
An Unexpected Drop
Many snowbirds are caught off guard with the lower loonie; few expected it to be this low when they made their travel plans, leaving them in a bind. With the loonie 40 percent lower, there are few deals to be had. Economists believe we’re still adjusting to the weaker currency, and that the full impact has yet to be felt.
“Canadians pulled back on visits in the second half of 2014, with the number of trips down about five per cent through early 2015 (to about four million annual trips), but the latest data suggests improvement as far as visitor numbers is concerned.” says Michael Dolega, senior economist with TD Economics.
“I think it’s going to take a few quarters. The second shoe might not have dropped. The pace (of the fall in the loonie) is not what people have expected and once it stabilizes people will adjust.”
Making the Most of It
If you’re not ready to cancel your travel plans, there are some things you can do to protect yourself from the lower loonie. Hindsight is 20/20 – consider buying currency ahead of time, so you’re not impacted by exchange rates during your trip down south. You might also consider travelling to alternatives destinations where the exchange rate isn’t so bad like Mexico. If you’ve still got your heart set on the U.S, consider cutting back on your spending. For example, don’t dine out as much and cook at home instead.