Where Goes Europe?

| April 22, 2022

We are in the midst of two competing European narratives. The first is that removing Covid restrictions will result in a significant economic rebound in European Union (EU) economies. The combination of pent-up demand and the return of international tourism makes EU companies look cheap. Low debt and great dividends add to the attraction. The euro started the year off great. On January 3, it took about $1.13 to buy one euro. By February 9, a euro cost $1.1435. Then Russia invaded Ukraine. The euro dropped about 5% on war and energy fears, hitting $1.086 by March 7. What remains to be seen is whether or not the selloff is justified by events on the ground.

Generally, EU nations have reduced or eliminated Covid restrictions. Denmark has dropped all travel restrictions and Covid restrictions. France no longer requires negative Covid tests for the fully vaccinated and the vaccine passport is almost completely gone. Germany uses a digital registration form, but vaccinated travelers have few restrictions. Ireland abolished their restrictions, but want people to wear masks on public transportation. The United Kingdom is fully open and virtually unrestricted. Spain and Italy are more complicated.

Anecdotally, I am seeing more of our clients and friends traveling in Europe. Not only is there pent-up demand, but the decline in the value of the Euro makes European travel a relatively good buy right now. Recently, I tried to book a hotel in Villefranche-sur-Mer for the last weekend in May. All of the acceptable hotels were sold out. I then tried several of the hotels that I like in nearby Nice, but all four and five-star hotels were also gone. I did find a hotel a few blocks from the Mediterranean that had good reviews for the cleanliness of its rooms. I booked it right away. Nice is the fourth-largest city in France. To have all of the decent hotels sold out months in advance is like having all of the hotels in Miami occupied. I have not had difficulty getting a room in a good hotel in Nice, even on short notice, on the many occasions that I have stayed there.

I do not know which of the competing narratives will prevail. War throws into question all of our normal calculations. What I do know is that some of my fondest memories are of the good times I have spent with friends and family in the beautiful cities of Nice and Villefranche-sur-Mer. I look forward to being there again with the greatest anticipation. Apparently, there are many thousands of others who feel the same way.