Sterling rise good news for long-haul travel: report

While sterling has slumped to a 22-month low against the euro and is significantly weaker than a year ago against most European currencies, it has strengthened against currencies for top long haul destinations. 

At a time when pundits are reporting a surge in demand for long haul packages because these now come close to matching the cost of European holidays, intelligence from the latest quarterly Post Office Travel Money Holiday Money Index supports the idea that UK holidaymakers plan to travel further afield.

Most notably, US dollar sales have surged by 14 per cent for January-March 2016 compared with the same period a year ago. This is a significant increase because the dollar is the Post Office’s second bestselling currency and the double-digit percentage rise is more meaningful than for currencies where sales levels are lower. It also suggests holidaymakers are ignoring the fact that sterling is three per cent weaker than a year ago against the US dollar, possibly because they believe the USA will be good value once they get there.

The US dollar is one of 14 long haul holiday currencies that dominate Post Office Travel Money’s Fastest Growing Currencies top 20 for the first three months of the year. Many of the currencies that feature in the growth chart have also seen big surges in the value of sterling, suggesting that increasing numbers of holidaymakers are making their destination choices based on where their travel cash will stretch further.

Andrew Brown of Post Office Travel Money said: “Sales of long haul currencies are booming.  This suggests a move towards holidays further afield – especially as it is being reported that long haul destinations are competing well on price with European ones, where package prices are rising. In the case of the USA, we believe some people who would have visited Egypt have swapped Sharm el-Sheikh for Florida. Prices in Orlando remain very attractive for families on a strict budget.”

Thailand is one of the long haul destinations where demand for holiday packages is said to be surging.  To underline this, Post Office sales of the Thai baht have increased by 17 per cent year-on-year, indicating an awareness of the good value available in both holiday packages and on the ground prices.  The latest Post Office Holiday Costs Barometer reveals that Phuket rates as third cheapest among long haul resorts for a barometer basket of eight tourist staples.  A family of four can have a meal with drinks for under £55.

Prices in Bali and Cape Town are even cheaper, which helps to explain why sales have surged by 23 per cent for the Indonesian rupiah and by 20 per cent for the South Africa rand compared with January-March 2015.  Another factor in the sales surge for South Africa is the fact that sterling has risen by 19.3 per cent year-on-year against the rand.

Poor exchange rates do not always have a negative impact. The Holiday Money Index sales growth chart reveals that Denmark is looking particularly popular – fuelled by demand for Copenhagen city breaks. Sterling is down over nine per cent on last April but Danish kroner sales have mushroomed by 52 per cent, making it the Post Office’s top growth currency.

Other city-break destinations proving popular are Stockholm (Swedish kroner +18 per cent) and Prague (Czech koruna +8 per cent), despite a sterling rate fall of over 10 per cent for both their currencies.  Croatia is also looking as though it will gain further ground this summer despite the weak pound, which is worth around 10 per cent less than a year ago.  In spite of this, sales of the Croatian kuna are up by 19 per cent year-on-year.

The biggest sterling rate fall of 13.2 per cent has been against the Icelandic krona – and 7.7 per cent of this has been since January.  Despite this, Post Office sales of the Icelandic krona have risen 14 per cent year-on-year and are up by 100 per cent over five years.

Conversely, although the Turkish lira has fallen 10.4 per cent in value against sterling year-on-year, this has not helped to drive demand.  Concerns about safety in Turkey’s resorts and cities has depressed demand and Post Office lira sales have slipped over 50 per cent to match the widely-reported big fall in demand for Turkish packages.

There has been little movement within the Post Office’s 20 bestsellers, although the Singapore dollar (19) and Swedish kronor (20) are new entrants.  However, 12 of the 20 Fastest Growing Currencies are new to the table.  The highest entrants are the Chilean peso in second place with a 31 per cent year-on-year rise in sales and the Brazilian real in fourth position with a 24 per cent increase.  The Costa Rican colon (+19 per cent) and Peruvian nuevo sol (+18 per cent) complete the quartet of Latin-American currencies in the top 10.