Foreign Perspectives

Archive for the ‘Finance’ Category

Although we set off for France with the intention of spending the rest of our lives here, in practice I left on a career break which left open the chance of me returning to work at any time up to five years from my departure from work way back on February 20th 2004.

Whilst at the time we thought of it as essentially free unemployment insurance, as y’all know we’re currently in the process of returning and with the global economy being in the current mess that notional “free insurance” has turned out to be quite valuable to us now. Not only do I have a guaranteed job waiting for me, but it’s a nice safe one at that and seems a good place to be sitting to ride out the coming recession/depression for the next year or two.

Although obviously not everyone will have the opportunity to leave on a career break, it’s definitely worth taking that route just in case things don’t work out. If they do work out then there’s no downside as you don’t have to return from a career break but on t’other hand if they don’t or your plans change as ours did…

Not a massive one but a jump nonetheless.

Chances are that it’s down to one of the oddities of the recession. Most of our internet income comes via the stable of accommodation listings sites that we run. Since holiday accommodation falls in the category of discretionary expenditure you’d think that this income would go down quite sharply during a recession. So it did initially, but the accommodation owners read the news too and have realised that their income should be dropping. This in turn means that they start advertising more which initially showed up in increased numbers of new entries on the sites and now seems to have started to show up in increased adsense revenue.

Definitely peculiar effects, but the question is what’ll happen during the rest of the year?

Sometimes it seems that it’s purely the UK that’s in the doldrums economically at the moment whilst France appears to be sailing merrily along.

However, locally we have seen that both of the local cafés are now closed. Whilst one does close for the winter normally it’s now closed down altogether and its premises have been taken over by the local youth club. The pizza outlet is still open but sporadically whilst the hotel seems to have closed up for the winter at least if not for longer. Perhaps the best indication is the local bakers who have severely cut back on their production and have commented that it’s “bad everywhere”.

Perhaps most tellingly, the toy shop was virtually empty at the peak of the Christmas shopping season.

So, whilst at the top level all seems relatively OK, the bottom level tells quite a different story.

We’re in the midst of our customary Christmas closing and generally lazing around at the moment.

Boxing Day brought us our first serious bought of snow for several years and for a while it was looking like we’d be snowed in for quite a while. As usual the French didn’t even bother to slow down on roads completely covered with ice and snow so I’m sure that the accident figures are well up.

France is a slightly peculiar place to be over Christmas in that they don’t formally “do” Christmas thus the shops were relatively empty on Christmas Eve and indeed the toy shops were eerily empty even the week before Christmas. Just as eerily empty as the toy shops in the UK were a few weeks earlier though that presumably was down to the current recession.

Although the shops do close several hours early (as does the post office) on Christmas Eve and everything is closed on Christmas Day, by Boxing Day it’s back to normal everywhere and you’d think that it was a normal shopping day. The law doesn’t allow them to have sales at the moment so you don’t get the usual post-Christmas sales that you do elsewhere and nowhere do you get the 70%+ reductions that are commonplace nowadays because the law won’t let shops sell stuff at a loss (which should create interesting closing down sales in due course).

On the sale front, we were comparing prices with the UK and found a surprising number of things sitting at around two to three times the UK prices at the current exchange rate. Obviously with all the shenanaghans recently with the interest rates  the exchange rates are not really at their “true” levels and if the price differentials are anything to go by it should be around EUR 2 to the pound rather than the current 1.10 or so which implies that there’s going to be either a major drop in the euro interest rate or massive increases in unemployment in the euro zone.

That’s question that many in the travel trade would dearly like to know the answer to but, as always with such questions, it’s not possible to get a really definitive answer to it in advance.

Holidays and vacations are discretionary expenses which means that they’re among the first to be cut back on when times get tough and this seems to be one of those particular times. However, many people don’t want to skip a vacation so what you could see in this area are people taking shorter vacations, downgrading the accommodation that they stay in, and probably using local or short-haul trips rather than heading for long haul destinations.  We’ve already noticed that this year with the poor exchange rate encouraging Americans to book via a hostel site rather than via a hotel booking site and that will likely become much more common in the coming year.

Added to the problem of getting the money saved or available on credit is the exchange rate problem for overseas holidays. We’ve seen the pound/euro rate moving from around 1.30 to more like 1.00 in a very short period of time ie a holiday from the UK to Europe has risen in price by around 30% even if the base price remained the same (which, of course, it rarely does). Throw in hikes in price from the airlines and that means a substantial rise in the cost of your holiday.

So what will the outcome be? Well, on our listing sites we’ve seen the traffic drop around 80% compared to the same period last year which implies a very substantial drop in bookings in 2009 for many people. Notable too is the increase in the number of adverts we’re taking onboard which implies that the owners are ramping up their advertising early presumably because they’ve had fewer than usual booking enquiries. However, even if both those indications are pointing towards much lower bookings in the year to come it could be that people are simply postponing their bookings until the economic picture clears up.

In reality I suspect that there will be a lot of last-minute bookings in 2009 but that overall there will be a lot fewer people going on holiday which could mean some great discounts on the more expensive holidays if you’re prepared to wait. Unfortunately, it’ll also mean that your choice will be much more limited in 2010 as many travel related businesses will be closing up in the coming year.