Cheaper travel costs dampen impact of Sterling slump

The pound may have plunged to a 13-month low against the euro and other European currencies but there is plenty of good news for people planning trips abroad in one of the busiest holiday booking months.

Research by Post Office Travel Money for its Holiday Money Report reveals that lower prices in most European resorts will cancel out the impact of the sterling slide.  At the same time currencies for many popular long-haul destinations including Mexico, Malaysia and Thailand have weakened against the pound.

The biggest gain for sterling has been against the South African rand so UK tourists on safaris, fly-drive trips along the Garden Route or exploring Cape Town will see travel cash stretch 26 per cent further than last year.  In just five years sterling has doubled in value against the rand.

Sterling is also surging against the Mexico peso, which means that Cancun will be a bargain bet in 2016.  Sterling has risen in value by six per cent since the start of the year and in a year has gained 18 per cent against the peso.  This means UK visitors changing £500 will get £76 more in peso than a year ago.  Mexico may therefore be a better bet for a budget break than the Caribbean, where the pound buys seven per cent less currency than a year ago.

Holidaymakers heading east will be better off in Asia and the Indian Ocean as well.  A sterling surge of over nine per cent against the Malaysian ringgit compared with a year ago has compounded the impact of falling prices in Penang to make tourist staples 27 per cent cheaper in Malaysia’s most popular destination4.  Sterling has also strengthened by 1.5 per cent against the Thai baht year-on-year.

While the US dollar is at a five-year high against the pound, making top UK choices Orlando and New York around 10 per cent more expensive, three other dollars are significantly weaker. The Australian, New Zealand and Canadian dollars have each fallen in value since last February and are now over 10 per cent weaker than two years ago.

One of the few European currencies to have lost ground against sterling is the Norwegian krone.  A six per cent year-on-year drop, rising to 22 per cent over two years, makes a Northern Lights trip to Norway a better prospect than visiting Iceland for the Aurora Borealis.  Sterling has fallen 10.5 per cent in value since last February against the Icelandic krona.

Andrew Brown of Post Office Travel Money said: “This is definitely a year when it will pay people to do their homework before booking a destination.  With sterling’s recent fall in value against more than half of our bestselling currencies, you can’t blame them for thinking twice about where to go on holiday.  However, canny travellers will be ‘quids in’ if they opt for destinations with weak currencies or those where local prices are low.  Better still, if they combine both elements their holiday money will stretch further.”

Most notably, despite a fall of over 10 per cent since last summer when sterling hit €1.41 to £1, the picture is far from gloomy for people planning visits to the eurozone.  Post Office Travel Money research shows that fierce competition to attract tourists has led to hefty price-cutting in many popular holiday destinations – resulting in lower rather than higher prices this year.

In Portugal’s Algarve and on the Greek island of Corfu, meals and drinks will cost UK visitors 13 per cent less than a year ago because local price falls far outweigh sterling’s slide.  Prices are also cheaper in Sorrento, Italy (down five per cent) and on par with 2015 in the Costa del Sol.

Outside the eurozone, while the Croatian kuna (sterling -6.9 per cent) and Bulgarian lev (-5.7 per cent) are among the 10 currencies against which sterling has fallen most, local price falls mean the Post Office barometer of tourist staples is down 11 per cent in Sunny Beach, Bulgaria, one of Europe’s biggest bargain resorts, and is four per cent cheaper in Zadar, Croatia.

However, city break holidaymakers visiting Prague will have to dig deeper in their pockets.  Not only has the Czech koruna risen in value 7.8 per cent since last February but higher meal prices mean that Prague is likely to be around 20 per cent more expensive than last spring.

Sterling’s biggest fall of 11.6 per cent has also been the most surprising.  After two years when holidaymakers could look forward to seeing their pounds stretch much further in Japan, a surge in its value means they will get around £66 less Japanese yen on a £500 transaction.