Preventing Euro Confusion

<B> Preventing Euro Confusion</B>
<I>Travel Manager Advises Others To Set Up Accounts Now</I>

By Amon Cohen

North American travel managers who make significant purchases in Europe should consider setting up a bank account in Euros before the multinational currency launches on Jan. 1.

That is the advice of Joan Scales, travel manager for The Irish Times and chairman of the Ireland branch of the Institute of Travel Management of the U.K. & Ireland. Scales' newspaper has been preparing its finances and briefing its staff on the implications of the Economic and Monetary Union for more than three years.

The Euro is being adopted by 11 members of the European Union, collectively known as the "Euro zone"--Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. For the first three years, it will exist only as a virtual currency alongside each Euro-zone member's national currency. Euro banknotes and coins will be issued at the beginning of 2002.

This means that American visitors to Europe will find little difference for the three transitional years, which Scales said are intended to create awareness of how EMU will work in practice. During that time, banknotes in one Euro-zone currency will not be accepted in a different country. For instance, German marks will not be accepted in France, even though both the mark and the French franc will have tied Euro values.

What will be different is that invoices and receipts will be issued in dual currencies. The Euro also will help companies, wherever they are based, to save on travel purchasing administration costs. ''At the moment, American travel managers don't need to do anything unless they do a lot of business in Europe, in which case they should open an account in Euros,'' Scales said. ''They can feed dollars in and use it to settle all bills in Europe from one account with one currency. It means they will not lose money on transaction costs every time they have to buy in a different currency.''

On the ground, travelers will continue to circumvent currency confusions by the time-honored technique of spending through their corporate cards. As an alternative, American Express is issuing Euro travelers checks in denominations of 50, 100 and 200 Euros. $1 is worth approximately 1.2 Euros.

Amex also will issue corporate card statements for Euro-zone cardholders in dual currencies and will accept payment in either. Some management information also will be available in both the national currency unit and the Euro, which particularly should help travel managers attempting to purchase on a pan-European basis.

''There will be an accelerated move towards a pan-European consolidation of purchasing,'' Amex head of business travel for Europe Maria Lilja told a European business forum staged in Amsterdam by her company on Oct. 30. ''Large companies will see better than before the benefit of negotiating flight deals, and possibly car rental and hotels, on a Europe-wide basis.''

If the arrival of EMU is confusing to Americans, an Amex survey of 400 European purchasing managers and business travelers showed there is little more enlightenment across the pond. The survey revealed that 75 percent of travelers have not been briefed by their companies on the Euro and its implications, even though 40 percent of corporations will begin dealing in the new currency in January.

Fifty-five percent of corporate purchasing managers said they also need more information, and 43 percent are not confident their companies have anticipated the problems introducing the Euro will cause.

Ignorance is greatest in EU countries that have opted out of EMU, including Great Britain, Sweden and Denmark. Eighty percent of U.K. business travelers have received no briefing, even though their companies will be required by many European customers to quote prices in the new currency from Jan. 1.

There also is disagreement over whether the Euro will force down the cost of travel. Seventy percent think that it will, a view that is endorsed by Andrew Fletcher, chairman of major U.K. travel purchasers' grouping the Business Travel Liaison Group.

The optimists believe that a common currency will expose price differentials on different ends of the same route (for instance, Frankfurt-Paris can cost more than Paris-Frankfurt) and on journeys of similar lengths. Once such discrepancies are exposed, it is argued, suppliers will be embarrassed into dropping their price to match the lowest rate they quote. ''I suspect fares will go down. The Euro will give better transparency on pricing anomalies and carriers at least will have to explain why they are there,'' said Fletcher.

However, KLM senior vice president for finance John de Die told the Amsterdam forum that such anomalies could be justified. Differences between national markets, such as taxation, airport landing charges and market demand, will ensure that price differences remain. Certainly, enormous variations in costs per mile even from the same country lend weight to his argument.

Maria Lilja expressed mixed views on the subject. ''Flights out of London to North America are 25 percent higher than those from continental Europe,'' she said. ''Smart buyers will be able to exploit these discrepancies to their advantage, but we should be wary of assuming that prices are automatically going to fall."

A gradual leveling out, particularly of business fares, is more likely, Lilja said. "Some prices will fall, but others could rise. Operating costs and taxation vary widely across the Euro zone and suppliers' pricing policies have to take this into account.''

Amex will monitor airline and other travel costs following the Euro's introduction through its European Corporate Travel Index. ''This should enable us to identify the routes where price transparency is affecting fares--information we will share with our clients,'' Lilja said.