Holiday abroad price increases and how to pay pre-Brexit prices
On average, every UK resident goes abroad for a holiday once a year - but these trips are getting significantly more expensive due to foreign exchange moves since the Brexit vote. In fact, the average UK family of four may pay around £500 extra for a week abroad this year. As annual holidays play a crucial role in our general well being, it is important to understand the impact of these FX moves and find ways to bring down the cost of a holiday abroad, since holidays take a significant chunk out of the average UK household budget.
- Average Cost of Holiday Abroad
- The Pound's Decline: What is Means for Your Holiday Costs
- How to Pay Pre-Brexit Prices for a Holiday Abroad
- Where is the Pound Strong?
Average Cost of a Holiday Abroad
The average family of four spent over £3,000 for a 9-night holiday abroad in 2015 and early 2016. We arrived at this figure after analyzing two sources from the Office of National Statistics: Travel Trends 2015 and Family Spending 2016 (data through March 2016). Using data from these two studies, we calculated average per person round-trip flight costs of £187 and per night hotel costs of £22 and food & entertainment costs of £48. The average visit abroad lasts 9 days, resulting in a cost of £817 per person, which we calculated as follows: (9 nights x £22) + (9 nights x £48) + £187 = £817. The cost rises fourfold for a family of four, totaling £3,268.
|Cost of 9-Night Holiday Abroad in 2015/16 for a Family of Four|
|Spend Category||Per Person||Total|
|Hotel||9 nights x £22 = £202||£808|
|Food, Drink & Entertainment||9 nights x £48 = £428||£1,710|
|Total for 4 People over 9 Nights||£817||£3,268|
This data is based on averages for destinations around the world, from the cheapest to the most expensive places to visit.
The Pound's Decline: What it Means for Your Holiday Costs
Since the Brexit vote on June 23, 2016, the pound has dropped steadily in value, losing 18% against the dollar and 11% against the euro by early March 2017. As a result of these currency fluctuations, our pounds don't go as far as they used to. Today, the same holiday costs more than it did a year ago. Our main holiday expenses - hotel, food, drink and accommodation costs - are bought in the local, foreign currency and may well be up 10% to 20% in pound terms.
The following chart illustrates what the average UK holiday abroad may cost in the future, assuming a 15% increase in all costs due to the pound's drop in value since the Brexit vote.
You may find that air fares are not showing any signs of upward pressure - yet. Air pricing is complicated, but we are experiencing a combination of extra supply (airline have added more routes), low oil prices and jet fuel hedging, which act together to keep air fares low. Jet fuel hedging is a tool airlines use to protect their bottom line against fluctuations in their biggest variable expense - fuel. Jet fuel hedges basically let an airline lock in fuel prices (kind of like a fixed tariff on your home energy bill) and are laddered to spread out risk over time. As these various jet fuel hedges roll off (expire) and if oil prices creep up, we will likely see an increase in UK air fares.
Brexit has not only raised the cost of our holidays; Apple prices have gone up on our favourite phones and tablets, too.
How to Pay Pre-Brexit Prices for a Holiday Abroad
Unless you've pre-booked and pre-paid for your future trips, you'll need an alternative way to pay last year's prices for this year's holiday abroad. One of the best ways to do this is to explore a cheaper part of the world. We've analyzed data from the ONS Travel Trends Survey, in order to find interesting destinations that still cost less than the average UK holiday did in 2015. By choosing a more economical destination, you can holiday abroad for the same cost as last year, despite the difficult FX conditions.
The average cost of a holiday abroad in 2015 (pre Brexit) was £69 per day, including hotel, food, drink, entertainment, etc. (excluding flights). Staying in the following destinations should cost you less than £69 per day on average in 2017, although clearly your choice of hotel and dining options will play a large role in your total holiday bill.
|Good Value Destinations||2015 Cost/Day/Person||Local Currency||FX Effect on Pound||Estimated 2017 Cost/Day/Person|
|Turkey||£55||Turkish Lira (TKY)||+14%||£47|
|Bulgaria||£44||Bulgarian Lev (BGN)||-12%||£49|
|Other EU Countries||£59||Euro (EUR)||-11%||£65|
Countries that were expensive to visit before Brexit will be even more expensive to visit now. If you're watching your budget, you may want to avoid booking a holiday in countries that cost more than average.
|Expensive Destinations||2015 Cost per Day per Person||Local Currency||FX Effect on Pound||Estimated 2017 Cost per Day per Person|
|Denmark||£91||Danish Krone (DKK)||-6%||£96|
|Norway||£94||Norwegian Krone (NOK)||-10%||£103|
Where is the Pound Strong?
A few currencies have fared worse than the pound since Brexit. Two of them - the Turkish Lira and the Barbados Dollar - belong to popular holiday destinations. As a result, your pound will go further in Turkey or Barbados (also Egypt) than it did before the Brexit vote. While Barbados is still relatively expensive, it is no more expensive than it was before June 2016.
|Destinations for Strong Pound||2015 Cost per Day per Person||Local Currency||FX Effect on Pound||Estimated 2017 Cost per Day per Person|
|Egypt||£53||Egyptian Pound (EGP)||+70%||£31^|
|Turkey||£55||Turkish Lira (TKY)||+14%||£47|
|Barbados||£89||Barbados Dollar (BBD)||+2%||£87|
^Egypt has suffered from high inflation of 28% year-on-year through January 2017, which means the 70% drop in the Egyptian Pound to the GBP doesn't translate into a 70% drop in the cost of a holiday in Egypt.
Anyone booking the same holiday today as they did last year will likely pay a significant amount more now. While many interrelated factors play into the cost of a holiday - exchange rates, hotel and flight demand, global fuel prices, local food prices, etc. - those traveling from the UK these days will feel the heavy effects of a less-valuable pound. If you're not prepared to pay up to 20% more for your holiday this year, how can you get some R&R at last year's pre-Brexit prices? The following chart shows how estimated average daily costs (per person) by destination compare to average UK holiday costs from 2015.
Clearly, the cost of your holiday will ultimately depend on how you travel, from budget to 5 star. The destinations listed above are meant to give you a general idea of how far your pound will go in different countries, relative to one another. By choosing your destination wisely, it is possible to enjoy a holiday abroad for less than the average cost of a holiday before Brexit.