Opinion: How the holiday pound in your pocket has held its value

Opinion: How the holiday pound in your pocket has held its value

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Sterling may be down on the currency markets but most holidaymakers can expect a good deal in their destination. Andrew Brown of Post Office Travel Money explains

These are unsettling times for the travel industry. The cancellation of Tunisian programmes by leading operators, ongoing security issues in destinations popular with UK holidaymakers and capacity concerns in others are enough to give anyone sleepless nights.

On top of this we have to contend with turbulence in the currency market caused by a sharp drop in oil prices, falls on the stock market and speculation about a possible vote in favour of Brexit.

It is less than a month since the annual Post Office Holiday Money Report reflected on the power of the pound and the role this was likely to play in destination choice in the coming year.

Since then sterling has fallen in value against the euro, while the US dollar is at a five-year high against our currency.  On the surface, things are looking far from positive.

Fortunately, this does not tell the whole story because sterling is on the up against currencies for many long-haul destinations including South Africa and Mexico where holidaymakers will have over 20% more travel cash to spend than a year ago.

They will also be quids in if they travel to Malaysia, New Zealand, Canada, Kenya, Thailand and many other destinations outside Europe – and that should be a strong selling point for these destinations.

Clients considering trips to Brazil before or during the Olympic Games will benefit from sterling’s most spectacular gain of more than 43% against the Brazilian real.  

Bear in mind also that while the strength or otherwise of sterling is important, it is not the only financial factor for customers to consider.

Our annual barometer of tourist costs revealed that local prices for meals and drinks have fallen in two-thirds of the 44 resorts and cities we surveyed worldwide.

The cost of eating out and drinks in local bars and restaurants is likely to take a big chunk out of most people’s holiday budget and the evidence we found of significant price reductions – particularly in Europe - will easily outweigh the impact of any sterling falls.

Here is why – sterling may have fallen 5% against the euro in the past month, but it remains roughly on a par with its value a year ago and it is worth almost 10% more than two years ago.

Set against this, competition for tourist business means that the euro price of an evening meal with a bottle of wine, together with a basket of other drinks, is down around 10% year-on-year in the Costa del Sol, 12% in southern Italy, 21% in Corfu and 26% in the Algarve.

Away from the euro zone there have been similar falls in places like Bulgaria and Croatia. The cost of meals and drinks is down 23% in Sunny Beach and 20% in Zadar, making the resorts much cheaper for UK tourists even after falls of around 2% in the value of sterling against the Bulgarian lev and Croatian kuna are factored in.

All in all, it remains a financial win/win for people visiting most resorts in Europe and many further afield, giving plenty of reasons to be cheerful for those who have booked trips and are travelling soon.

Those who delay their decision-making may find heavy demand for the Western Mediterranean results in limited availability and higher prices – both for holiday packages and tourist staples.


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