A Great Vacation Idea: Utilize Favorable Foreign Currency Exchange Rates

A great vacation idea often arises by taking advantage of a favorable foreign currency exchange rate – your own currency is worth more than that of a country that you wish to visit.

Unfortunately the reverse can also occur and your own currency loses ground against the currency of a country that you hope to visit. When this happens travel can be prohibitive.

Recently the purchasing power of the American dollar has eroded against the British Pound and the Euro. As such, traveling to many European destinations is no longer cost effective.

Fortunately there is a simple and convenient means of identifying vacation destinations where you are more likely to “get your money’s worth”.

Use my Big Mac Scale (not to be confused with the Big Mac Index developed by the Economist Magazine).


Start by obtaining the following information:

1) Go to the Currency Converter and select the price of a Big Mac in your own country’s currency and the price of a Big Mac in the currency of any country(ies) of interest to you. Note that Big Mac prices could be outdated by many months – that is one of the weaknesses of the calculation that will follow later. However, the assumption being made is that the price tag on a Big Mac in two different countries reflects that same monetary value after conversion.

2) From the same website, select the exchange rate between one unit of your own currency and the currency(ies) of the country(ies) that you are interested in visiting. For the calculation that will follow, you can either use today’s exchange rate (the recommended choice) or an exchange rate closer to the month in which the Big Mac Prices were assembled into a table (not recommended if the purchasing power of your own currency has significantly declined over the last few months). If you choose the latter, use average value of the exchange rate as taken from XHistory. Simply select the date.

Using a spread sheet, do the following calculations for your own country and for each foreign country of interest to you.

Exchange rate for each currency
________________________________ X 100%

Big Mac price in each foreign currency



The points behind this vacation idea:

1) If the foreign percentage is greater than that of your own country, travel to that foreign country is cost-effective.

2) If the foreign percentage is less than that of your own country, travel to that foreign country is not cost-effective.


Here is a sample calculation for an American thinking of visiting Britain or Argentina. The exchange rates are for March 20, 2008.

For the U.S: (1/3.41) X 100% = 29.33%

For Britain: (0.49960/1.99) X 100% = 25.11%

For Argentina: (3.15430/8.25) X 100% = 38.23%

According to the Big Mac Scale calculation, Argentina is a more cost effective vacation destination for Americans than Britain.

Thus Argentina becomes the better vacation idea.

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