The Practical Nomad

The Practical Nomad's top tips for travelers
by Edward Hasbrouck

from The Practical Nomad: How to Travel Around the World
and The Practical Nomad Guide to the Online Travel Marketplace

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1.4. "How can I afford to travel?"

Lots of travelers seem to want a magic bullet for travel costs: "How can I go on fancy tours or cruises, or go to big cities or major tourist destinations in expensive countries like those in Western Europe, stay in five-star hotels, and have everything be cheaper?"

There are some money-saving tips that can cut the cost of this sort of travel to these sorts of places, but let's not lose the forest for the trees. Two things, above all else, will determine how expensive or how affordable your travel will be. Compared to these, the impact on your travel bottom line of other strategies for cutting costs is trivial.

Travel is a "service industry." When you travel, most of what you're paying for is for people to do things for you: cook and serve your food, clean the rooms and make the beds in the hotel, drive or guide you around, and so forth. Most of the cost of travel services is the cost of labor. What this means is that the cost of local travel services in a particular country is almost purely a function of local wage scales. And the differences between First World than Third World wages are so extreme that which world you travel in makes much, much more difference to your costs than how thriftily you travel.

The premium you have to pay to arrange things in advance is highest for travel in countries where local services are cheapest. That's because the foreign intermediaries (tour operators, travel agents, etc.) in the First World have dollar or other hard-currency, high-wage, costs and expenses to cover: rent and overhead for an office in the USA, salaries for staff in the USA to handle your reservations, commissions in U.S. dollars to travel agents in the USA to represent them, a guide based in the USA or Europe to accompany the tour, and so forth. These are real costs inherent in making it possible for you to make reservations in advance from the USA. But these transaction costs far exceed the actual costs of services provided by local people at local wages in a Third World destination country.

In addition, only the more expensive local Third World tour companies and accommodations providers can afford to be connected to a computerized reservation system, maintain a foreign hard-currency bank account, or pay commissions to foreign travel agents. Even in wealthy countries there is usually an entire layer of local hostelries, guest houses, and freelance guides who aren't set up to take reservations through travel agencies or tour companies from abroad, and who have fundamentally lower costs and prices as a result. The cheapest hotel room in a major city that can be reserved from abroad may be five or 50 times the cost of the cheapest bed available locally.


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