Tips: Budget Travel

Internal burning...wandering fever...
Kalevala

Often when I tell people that I?ve traveled to thirty countries and spent nearly four years of my life traveling around the planet, their reply is ?I?d love to travel like you do, when I win the lottery?. My answer is always: ?You don?t have to win the lottery. Travel is cheap. Many people on fixed incomes travel the world because it is cheaper, easier, and more fun than staying at home!?

My answer causes people to step back. They have been programmed to believe that traveling the planet is a luxury available only to the rich and privileged. Yet, it isn?t. Travel, in today?s world, is accessible, easy, and comfortable, and cheap. All of you have to do is understand the travel industry and follow a few simple rules.

Travel Economics 101

Probably the single most important thing to remember about travel is that is a perishable commodity. If the hotel does not rent a room for the night or the airline does not sell a seat for a flight, their chance to make money is gone. The travel industry has to fill their rooms or seats (or whatever) every day. They can?t, like many industries, store the product in inventory and wait for a sale at a later date.

Obviously, the travel industry would love to sell every seat, room, etc. to the highest bidder. Most of the time, however, they have rooms, seats, etc. that need to be discounted to attract a willing customer.

In order to ensure profitability, the travel industry must continuously introduce new profit centers that are not so perishable. Most of the travel industry is designed so that the commodity that consumers identify with the travel company (such as a room at a hotel or a cruise ship) makes enough money to pay the expenses and other product lines create the profit center for the business. Look at cruise line for an example. If you are willing to travel in the off-season on a cruise ship, you can often pay $50-$100 for a room including food, entertainment, etc. This is just barely enough to pay for the food that you use on board. The cruise line makes its profits once you are on board (unless you go on an expensive, luxury cruise) by offering you hundreds of opportunities (usually fairly expensive) to spend more money on alcoholic beverages, tips, port excursions, spas, gambling casinos, bingo, art auctions, on-board stores, internet and phone services, etc.

 The Ten Cardinal Budget Travel Rules

• Travel off season as much as possible.  Off season travel costs anywhere between 25%-90% less than during more popular times.  You also get better service and more potential discounts off-season.
• Travel when and where businesses and destinations need you most. The misfortunes of destinations (terrorism, currency devaluation) or business will help you save money. 
• Spend as much time as possible in cheaper places (particularly Latin America and Asia). Travel in the third world costs about 50-90% less than in the US or Europe and is a lot more interesting to boot. 
• Don?t forget about your liabilities and assets at home while you?re on the road. Most people forget to take into account that their home life represents both an asset and a liability financially while you are on the road. You may be able to save some of the costs of maintaining your home by canceling subscriptions, turning your thermostat off, and even reducing your insurance coverage Also keep in mind  your variable costs at home when you?re figuring out travel budget. You may find that trips cost you only a little more than staying at home. In 2002, I took a two week trip to Singapore. I stayed in a hostel, ate at local stalls (by the way, Singapore probably the planet?s best street food ? cheap and always safe), and flew to Singapore as a courier. The total cost of my trip with airfare was a little over $1000. After I got home, I kept a diary of what I spent on variable costs at home and discovered that I spent about $750 every two weeks.
• Research the cost of travel in your destination before you go. Find out about the current costs of travel in your destination. Read the daily paper for stories about currency devaluations, travel businesses that are in trouble, and places that have experienced a noticeable reduction in travelers for whatever reason. 
• Ask for discounts and upgrades. The old maxim ?it never hurts to ask? goes doubly for travelers. Since travel is perishable, the travel industry would almost always rather give some extra or a discount to you, than loose you as a customer; particularly if they have a legitimate reason to believe that you?ll use their business again. 
• Be a professional bargainer and traveler. Don?t be afraid to bargain with vendors. Bargaining is an integral part of life in most of the globe. Travel services, based on the product?s perishability, are often negotiable even in the US and Western Europe 
• Minimize expenses by taking longer trips if possible and staying in one place for awhile. Transportation costs are often the most expensive part of your trip. The longer you travel and the more you stay in the same place, the less transportation costs will dip into your budget.
• Consider alternative travel options. Staying in other people?s homes, seeking out hostels and local pensions, exchanging your home with others, attending classes, and volunteering, working, and long term travel are always much cheaper ways to see the planet than short term cruises, resort stays, and bus tours. They also allow you to get much closer to real daily life in your destination 
• Generosity pays off. Contrary to what many travelers assume, locals usually want to go out of their way to help travelers. Often they do so out of kindness, but sometimes admittedly they are hoping to be remunerated in some way. A small tip can buy a lot of goodwill and access to people who can help you save money.

Finding a Cheap Airfare 101

The biggest travel expense for most ?travel like a local? aficionados is transportation to and from their home. Thankfully, there are three ways to save money on airfare: consolidators, couriers, and round the world tickets. In this section, I?ll touch on each of these options. If you want detail, read the Practical Nomad by Edward Hasbrouck (see book picks). After a long career in the discount round the world air ticket business, Hasbrouck has written the most comprehensive and readable explanation of the complexities of finding a good airfare anywhere.

Consolidator tickets: For most travelers, the best option for cheap airfare is a consolidator ticket.  Consolidators discount prices to consumers because they buy tickets en-masse from airlines for a wholesale price.

I generally find the easiest way to find a consolidator is:

• Go to a travel agency located in an area with many immigrants from the country you?re visiting (note: while communication can be difficult with these agencies, they know the destinations well. You may want to ask the agents if they are not too busy, for advice about the costs and sights in your destination).
• Read the Sunday travel section in a large city newspaper (San Francisco Chronicle, Chicago Tribune, Los Angeles Times, Washington Post, and New York Times have the most complete consolidator listings). Most have a page or two filled with small ads from consolidators. Surfing websites for the ?best consolidator deal? is time consuming and, in my opinion, usually irritating. Reading the newspaper, you can find a lot of consolidators all in the same place and start making calls to find out the details you need to know (length of stay restrictions, flight availability, etc.) to find the best fare to your destination.

One of the little discussed benefits of consolidators is that they know more about their fares than most travel agents. Most travel agents have hundreds of fare that change minute to minute.  As a result, you can ask a consolidator questions like ?When is the cheapest time of the year to fly to ??? and they, unlike most airlines, will give you a concrete answer.

Round the World (RTW) tickets: l RTW tickets are combinations of discounted (consolidator) one-way tickets strung together using several airlines (most of the time these airline operate in an alliance, like the star network.) Depending on the route, prices for tickets like this start at about US $1,500 from the United States The shorter and more direct your flight, the cheaper it is likely to be.  Get these tickets from a discount travel agency than you would pay if you bought separate tickets If you want to find a RTW ticket agency, look in the Sunday travel sections of a major US newspaper. Most RTW agencies are located in San Francisco.) 

Courier Travel: See my Big Blue Marble newsletter article about my courier trip to Singapore

Playing the Budget Travel Game to Win

There are two ways to travel cheaply. One is to learn how to negotiate the cheapest rates from the traditional travel industry. The other is to bypass the travel industry by living off the local economy.

While I believe that living off the local economy is by far the best way to travel inexpensively, I realize that many travelers either want to use services on the road that make them feel like they?re at home or simply love to travel in luxury.

If you want to use traditional travel suppliers, you must become an adept player at the budget travel game. The ?budget travel game? is the process of negotiating with the travel industry to take advantage of a constantly changing (and usually negotiable) set of benefits that suppliers provide customers to fill space. The suppliers try to offer as few enticements (frequent flyer miles, upgrades, discounts, etc.) as possible to get customers in the door without hurting their profit margin. Savvy customers use the industry?s desperation to fill spaces to get the most benefits possible.

How do savvy customers negotiate the best benefits? First, they recognize that the best deals come when the industry is desperate to fill space. Second, they build loyalty to a couple suppliers. Third, savvy customers understand trends in the travel industry and develop strategies to take advantage (or buck) these trends

Benefits of Loyalty:

The travel industry rewards their most loyal customers handsomely. The suppliers provide these loyal customers with a lot of benefits because they know that they can count on these customers to fill spaces, particularly during the low season. Read the Penny Pinchers? Passport (see book reviews) to learn some of the wonderful upgrades and benefits loyal customers can enjoy. You?ll discover that the benefits are more than are advertised through frequent flyer type programs. If you learn to just ask correctly, you can receive membership in exclusive clubs, free champagne and flowers, and a variety of other niceties.

Want to know some of the secrets to getting these benefits from travel providers? Here are few of the most basic rules: 

• Ask nicely. Typically if you seem like a compassionate friendly person you?ll be treated well. 
• Look like a frequent traveler. This doesn?t mean that you have to wear a suit or cocktail dress. All you have to do is look clean and professional
• Indicate to the staff member, when appropriate, that you may be willing to give them a larger tip if they are willing to give you good service. I must admit I have never tried this strategy; it feels weird to me. However, many frequent travelers I?ve met swear by this strategy. If it works for you, send me a note.

Frequent Flyer Programs

Though  loyalty has helped me to secure free flights, I don?t always buy tickets on my frequent flyer airline. Most of the time, I fly my preferred airline on domestic flights because the price differences between domestic flights are usually so negligible that it is not hard to find a good fare on my preferred airline.

However, on international flights, I sometimes find it hard to get a good fare on my preferred airline. Often, the standard airfares on international flights are higher than those offered by consolidators. Usually only a small number of airlines sell seats to a particular destination to consolidators.

Be careful about generating a lot of frequent flyer miles through buying non-airline related services or products. Usually the companies that affiliate with frequent flyer programs offer more expensive products and services than their competitors. In addition, trying to keep track of the often Byzantine rules associated with these rewards is time consuming and frustrating. Almost every time I?ve chosen to use a particular company?s service to get frequent flyer mileage, I?ve come out the loser in the end. However, if you a fan of a particular company?s service or find a company that offers services at a competitive price, by all means try to get frequent flyer miles.

Not all frequent flyer miles are created equally. Airlines generally will give preferences to people who earn most of their frequent flyer miles by flying that carrier (or partners). While sometimes these benefits are clearly described in the membership rules, more often the airlines do not tell you that they prefer frequent flyer miles earned on their carrier. However, airlines often use this distinction when they decide to upgrade passengers and provide other benefits.

Learning about Inexpensive Destinations:

• One of the best sources for a comparison of costs around the globe is the Economist Magazine?s Big Mac Price Parity Index.  The Big Mac Index compares the costs in dollars and euros of Big Macs around the globe. Most of the time, the countries with the lowest cost Big Macs are also the lowest cost places for travelers as well. The only exceptions generally to this rule are formerly (and currently) Communist countries (Russia, China, and Eastern Europe). Often these countries require tourists to pay more for many local services than the Big Mac index indicates. 
• Check internet bulletin boards and list servers for up-to-date travel information. Some of the most useful bulletin boards are posted on the major guidebook website. I particularly like Lonely Planet?s Thorn Tree. (Note: the information in most guidebooks is two years old. This can make a big difference. When I was in Argentina in 2003 every guidebook (based on 2001 research) made the country seem expensive; however, the truth was Buenos Aires when I arrived was incredibly cheap.)

Why Traveling-like-a-Local is Cheaper than Traditional Travel

Traditional travelers spend a lot more money than people who travel like a local because they are rushed and they are paying Western dollars for services that can be secured locally for a lot less money. Let?s look at some of the ways that traditional travelers spend more money in more detail.

Traditional travelers:

• Are hostage to high costs services provided by their hotels, cruise ships, etc. Tourists often pay a fortune to make a call or use the internet at a hotel or cruise. Travelers who seek out local services, on the other hand, are able to realize some big savings. For example, it costs $1 a minute for internet access or phone calls on cruise ships and hotels; as opposed to 50 cents to $4 an hour in local establishments. 
• Subsidize the travel company?s high cost overhead. Most traditional travel providers are based in Western countries. The phone operators, office staff, and executives are paid Western wages and the stockholders expect Western style returns for their investments (see my discussion of whether or not to use a travel agent or not below). The main function of these companies is to put together packages of services (usually on contract with local suppliers) for travelers. The people who actually provide you services are generally low paid locals employed by travel providers based at your destination. 
• Pay more for local restaurants and souvenirs (when they get ?free time? to explore the local area).

People who travel like locals, in contrast, save money by: 

• Renting rooms in someone?s home. These rooms (often called homestays; see tips for more details) cost about half of a comparable quality hotel room. The rooms you?ll rent are usually large, private rooms. In Latin America and Asia, room rental costs as little $5-8 a day (often with breakfast and sometimes dinner included). In Eastern Europe it is usually $20-30 a day. A private hotel room, even with a bathroom down the hall, will cost you between $10-15 a day in Asia and $30-40 in Eastern Europe.
• Getting free accommodation through hospitality exchanges programs (see tips for details). These programs allow you to get to know others and to stay in the comfort of someone?s home for a while. They also save a ton of money. Memberships in most hospitality exchange organizations are often free and homes are available throughout the Earth. 
• Scoring free (or low cost) lodging, car use, internet and phone accessibility by exchanging their home with other savvy travelers (see tips for details). The variety and quality of many homes available for exchange is amazing. You can exchange homes for multi-million dollar villas in Mexico or small studio apartments in Greenwich Village, New York City. 
• Staying in homes and pensions located outside of the tourist center. This allows them easy access to vendors charging local prices and lets these travelers avoid being ripped off by some of the unsavory con-artists and overpriced services that populate heavily touristed area. 
• Taking advantage of lower costs services in other parts of the planet to do things they?ve always dreamed of doing (see tips on volunteer and learning vacations). Whether you?ve always wanted to study a foreign language, learn how to cook exotic cuisine, get private dance lessons, or volunteer to help others, chances are that you can do so at considerable cost saving in another country. Private Spanish lessons from trained, native speakers in the USA cost $25-50 an hour; in Guatemala they are $3-5 an hour 
• Saving money on transportation and food by staying in one place for awhile. Most tours and cruises cost a lot because they move frequently between places. Spending time in one place studying, volunteering, or living in another person?s home, reduces these costs considerably.
• Being open to new ways of travel. People who travel like a local know that since travel is cheap, they can travel as much as they want to by looking for ways to extend their stay if possible. They are willing to do things to earn or save money such as taking short term jobs like Teaching English or Journalism, caretaking someone?s home, or considering ways to run their business or maintain their career on the road.

See my articles on Studying, Tangoing, and Living in Buenos Aires and Youth Hostel for more about cheap opportunities to travel like a local.

Notes:

• • Do you agree or disagree with any of these tips? Do you know any great tips that should be added? If so, send your comments to me (Paul Heller, founder of the Big Blue Marble) and I'll post them on my blog.
  • Check out the Big Blue Marble's extensive library of book reviews and links.