holiday money report

Holiday Money Report 2009 Post Office Travel MoneyA retrospective look at currency trends in 2009 and predictions for 2010

Holiday Money Report 2009

3 Post Office Travel Money

Post Office Travel Money 1

IntroductIon:

2009 ended as it started – on a dispiriting note of drama for the travel industry. Sterling’s slump in January had already sounded the alarm bell for a holidaying public facing the UK’s first full year of recession at home and the prospect of paying more overseas. But the failures of Scottish travel group Globespan and mid-haul specialist Allbury Travel Group before Christmas hit hard - leaving tourists stranded abroad and ruining the holiday plans of thousands of others.

In between it was not all doom and gloom. Sterling stabilised in value as the year progressed and, although the credit crunch put the squeeze on some people’s holiday plans, there were serious bargains for determined tourists in some of the world’s most aspirational destinations.

Despite tactical discounting by Spain and Portugal in particular, the eurozone countries took a battering as beleaguered UK holidaymakers voted with their feet against the all-conquering euro and chose Turkey and Croatia, 2009’s big winners in the short haul holiday market.

Against a backdrop of the much-vaunted UK ‘staycation’, huge losses by airlines and the headline-grabbing outbreak of swine flu in Mexico, the surprise success of 2009 proved to be long haul travel, with some destinations emerging as strong competitors to short haul favourites.

Concerted campaigns by Kenya to regain lost ground after 2008’s political unrest and by Thailand to re-position itself as a ‘value’ destination showed that if the price was right, people were still in the mood to travel. That helps to explain the growth in demand for all inclusive packages, especially popular with families wanting to know the total cost of their holiday before setting foot on foreign soil.

If these were positive indications of market resilience, there were also signs that consumers might retreat to the safety of a package holiday in the wake of more airline and operator failures. Post Office research revealed that growing numbers of UK holidaymakers were inclined to ditch DIY travel in favour of the safe haven of a fully-protected package holiday.¹

In this review of 2009 the Post Office, the UK’s largest travel money provider, looks back on a turbulent year, charting significant currency movements and identifying the strongest trends. And at the dawn of a new decade, the Holiday Money Report previews the issues and events that look set to shape consumer choice in 2010 and beyond.

Holiday Money Report 2009 Post Office Travel Money

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KEY FINDINGS SUMMARY

Currency movements and trends in 2009:

• After a rocky start to 2009 when sterling slumped as low as $1.27, the UK pound started to recover against the US dollar and reached a respectable $1.62 in August. Heavy discounting by hotels, restaurants and shops helped to keep US tourism afloat and by the autumn the Post Office was reporting year on year gains in dollar purchases of between 2-3 per cent.

• Eurozone resorts took a battering as the perception grew that Europe’s most popular family destinations were being priced out of the market because of the robust euro. Some resorts began to fight back and cut prices, while cheap packages offered by operators anxious to shift holidays meant that savvy travellers could sometimes pick up cheaper deals inside the eurozone than outside it.

• Holidaymakers looked outside the eurozone for value for the second year running and Turkey was the runaway winner with annual currency sales up 44 per cent. The Turkish lira overtook the Australian dollar to become the Post Office’s third-placed best seller and Europe’s top destination. Thanks to a strong sterling exchange rate UK tourists also got more lira for their pounds, although a sharp rise in resort prices meant that these were quickly swallowed up.

• Rocketing sales of the kuna helped Croatia to overtake Bulgaria and become the top-placed Balkan beach resort in a generally rocky year for eastern European currencies. The predicted slump in city breaks made the Czech koruna, Polish zloty and Hungarian forint some of 2009’s biggest losers.

• 2009 was the year when long haul travel challenged Europe for mass popularity. Bargain basement prices made Thailand, Kenya, Egypt and Bali particularly popular as Post Office sales of all their currencies soared.

• Holidaymakers changed more money at Post Office foreign exchange bureaux but the average transaction rose by only 4.9 per cent, which was unlikely to cover the increased spending costs made necessary by the drop in sterling’s value abroad.

Key events in the currency calendar for 2010:

• In January, not one, but three European Cultural Capitals will be unveiled as Turkey’s Istanbul, Pécs in Hungary and Germany’s Ruhr Metropolis launch a year of culture-based events to attract short break visitors.

• In February millions will tune in to watch the thrills and spills on snow and ice as the Winter Olympics get underway in Canada, bringing an unparalleled opportunity for Vancouver and Whistler to showcase their wares.

• Bargain hunters may prefer to head to hotter climes in February for Dubai’s 15th Shopping Festival. If so, they may find that the bargains are not restricted to its glitzy shopping malls, as Dubai claws its way back from financial crisis with dramatically discounted holiday deals.

• The Wizarding World of Harry Potter™ should bring families flocking to Florida when it opens at Universal Orlando Resort this spring. Or will the $10 per visitor entry fee planned by the US senate (but yet to be ratified) dampen demand from cash-strapped families?

• 32 national teams are competing but South Africa has, potentially, the biggest prize to win from June’s FIFA World Cup, to be staged in 10 venues across the country. But where in the world will people who loathe the ‘beautiful game’ head to avoid non-stop TV coverage?

• July/August marks the great school holiday getaway by families searching for sun and sand. How will the eurozone strike back after its drubbing by Turkey, Balkan beach resorts and the Far East in 2009?

• December is Christmas shopping month. Will New York again prove the bargain shopping centre for shopaholics or will the dollar scupper their chances of bringing back discounted designer labels from the Big Apple?


LOOKING BACK

10 destinations that made a currency commotion in the noughties:

• Eurozone: 12 European countries converted to the euro early in the decade and the strong pound made holidays cheap in those days. By December 2008 the euro had reached parity with the pound and has not lost much ground since.

• Bulgaria’s cheap packages and low living costs made it popular during the noughties – but another Balkan beach destination, Croatia, stole its thunder in 2009.

• Turkey: seemingly unstoppable, resorts like Bodrum and Marmaris gave Turkey mass appeal. As the euro rose in value in the late noughties, a reputation for value and a weak currency made it the obvious choice for families looking for cheaper deals.

• USA: sterling rose to an unprecedented $2:£1 in 2008, leading to a surge in demand for Stateside trips.

• Dubai: a 205 per cent rise in Post Office sales of the UAE dirham over the past four years shows that demand for holidays in the Emirate has been unrelenting.

• Egypt was the top mid-haul destination of the decade. Low package prices and cheap resort prices made Egypt’s Red Sea destinations popular with a 45 per cent growth in Post Office currency sales since 2005.

• Kenya: after post-election riots dampened demand for holidays in 2008, Kenya fought back hard to re-establish its tourism business and succeeded: it was the Post Office’s fastest growing currency in 2009.

• Thailand grew in popularity during the decade. It regularly topped the Post Office Holiday Costs Barometer with the lowest tourist prices and in 2009 successfully re-invented itself as a ‘value’ destination. Currency sales rose 12 per cent as a result.

• Malta made a successful transition to the eurozone in 2008 and is now one of its cheapest members, with tourist items costing significantly less than in Cyprus, which joined at the same time.

• Czech Republic: the Czech koruna was one of the most popular currencies during the noughties, proving the appeal of its capital, Prague, for city breaks. But as the currency’s value soared against sterling, demand for it came tumbling down – by 31 per cent last year alone.

LOOKING FORWARD – TEN FOR 2010

Exchange rates and living costs to watch:

Find out why in the preview pages of the Holiday Money Report.

• Thailand• South Africa• Florida• Las Vegas• Turkey

• Spain• Jamaica• Mexico• Dubai• Kenya



Currency movements and trends in 2009:

Dollar damage limitation: The heady days of $2 for every holiday pound may be over, but it was not all bad news for UK tourists visiting the USA during 2009. After a rocky start to the year when sterling slid down to $1.27 (March 2009), its slow recovery began in April, reaching a respectable $1.62 in mid-August.

Putting this into context, the August exchange rate gave transatlantic tourists almost 10 per cent more cash in their pockets than in the early noughties, while the rate in December meant that Christmas shoppers hitting the US ‘high streets’ were quids in, with around eight per cent more dollars to spend than at the same time a year previously (see figure 1 for rate movements from 2007-2009).

Heavy discounting Stateside made those dollars stretch further still on accommodation and in restaurants and shops. The annual Post Office Christmas Shopping Guide to prices in New York and London revealed that shoppers could save 20 per cent on a shopping basket of gifts bought in the USA instead of the UK – rising to savings of 67 per cent for some designer fashion labels.

Transatlantic ski trips were also cheaper. Aggressive discounting by hard-pressed US ski resorts led to an 11 per cent year-on-year drop in ski equipment and living costs in Vail, Colorado, making it significantly cheaper than Verbier, the top-priced European ski destination in the annual Post Office Ski Resort Report.

Admittedly, US tour operators may not have enjoyed the record bookings reported in previous years, but there were pockets of light. Florida, traditionally the family favourite, was reported a sell out by US specialist Jetsave with summer prices comparable to those in Spain.2

And a glut of new hotels in Las Vegas and New York resulted in a price crash in both those cities. One accommodation provider’s survey suggested that average hotel rates in both the Big Apple and Sin City had dropped almost 30 per cent in a year.3 America, it seemed, had hung out the sale signs, with sub-£400 flight-inclusive packages fuelling demand in the second half of the year from bargain hunters.

By the early autumn there were cautious signs of optimism as bookings began to pull back.4 The USA remained by far the most popular long haul destination choice for over 2,000 consumers questioned in a Post Office survey in late August. Around one third of those planning long haul winter holidays said they had chosen a trip to the States.5

Consequently, while 2009 may not have been the best ever year for US tourism, Post Office foreign exchange sales support the cautious optimism shown by tour operators and US tourism commentators of an improving situation.

Dollar purchases were up year on year by between two and three per cent in the final quarter, helping to balance drops seen earlier in 2009. Finishing the year only eight per cent down on 2008 therefore seems like a reasonable measure of market resilience – particularly when compared with the much steeper fall for euro sales.

Sarah Munro, Post Office Head of Travel Money said: “The dollar may have driven the value of sterling down from its $2 high, but the market for US holidays proved incredibly resilient. Not even the introduction of the Electronic System for Travel Authorisation (ESTA) in January 2009 could deter UK tourists from transatlantic travelling, suggesting that the Obama effect proved just the shot in the arm needed at a difficult time.

“Despite the exchange rate, the US remains tremendous value and the positive pricing action by all those who depend on tourists visiting the States is likely to keep them flocking across the Atlantic in the coming months.”

Eurozone takes a battering: The euro continued its onslaught against sterling for much of 2009. At parity with the pound as the year got underway, the euro has lost little ground since and is currently just under seven per cent weaker than at its 2009 high. Sterling may have gained a few points during the summer months – rising to a year best of €1.11 in early August – but it has remained shaky and is now worth a third less than when the euro was first introduced in January 2002 (see figure 2).

Although the euro is still the Post Office’s bestselling currency (see figure 3), accounting for a dominant 72.2 per cent of its foreign exchange purchases, a 2.3 per cent drop in share

Figure 1: Graph to show rates of the US dollar to sterling from 2007 to 2009

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2007 2008 2009

Figure 2: Graph to show rates of the euro to sterling from 2007 to 2009

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2007 2008 2009


compared with both 2008 and 2007 reveals the extent to which eurozone destinations took a battering because of the weak pound, as consumers looked elsewhere for better value.

In July and August, critical months for the eurozone, with families flooding abroad in search of summer holiday sun, the Post Office reported a drop of over 14 per cent in euro purchases. The picture for 2009 as a whole was equally gloomy and the latest official ONS figures for travel to Europe show a similar year on year decline.6

Looking for a chink of light, Google has reported a recent rise in eurozone destination searches online while successive Post Office Holiday Costs Barometer surveys showed that Spanish and Portuguese resorts had cut prices to attract back holidaymakers. Combined with the competitive market for late package deals, this meant that savvy travellers could still pick up bargain basement eurozone trips.

Sarah Munro said: “Research was the watchword for UK tourists who wanted to get the best value during 2009. Despite the weak pound, our research showed that Spain was cheaper than Turkey and eastern European beach resorts for a typical shopping basket of tourist items.

“We also found that living costs were lower in Portugal than in 2008 even though the euro was much stronger, which underlines the fact that holidaymakers need to consider resort living costs as well as the exchange rate when making their destination choice.”

Figure 3: Post Office Best Selling Currencies 2009 (2008 positions in brackets)

1. Euro (1)

2. US dollar (2)

3. Turkish lira (4)

4. Australian dollar (3)

5. Canadian dollar (5)

6. Egyptian pound (6)

7. Swiss franc (7)

8. South African rand (10)

9. New Zealand dollar (9)

10. Thai baht (13)

Europe’s winning pair: Turkey already had plenty to shout about in 2008 with a 21 per cent annual growth in lira sales but that performance was dwarfed by the 44 per cent year on year increase in demand for the Turkish currency at Post Office bureaux de change over the past 12 months.

In April the number of Post Office bureaux offering Turkish lira on demand was more than doubled to 4,000 branches and currency sales rocketed in response to show growth of between 32 and 53 per cent every month since then – making it the second fastest growing currency of the year after Kenya (see Figure 4)

Figure 4: Post Office Fastest Growing Tourist Currencies 2009 (sales increases compared with 2008)

0 10 20 30 40 50 60 70 80

Malaysian ringgit

East Caribbean dollar

Egyptian pound

South African rand

Thailand baht

Romanian new leu

Croatian kuna

Indonesian rupiah

Turkish lira

Kenyan shilling

Increase (%)

In July and August lira sales rose by 47.7 per cent year on year and by nearly 60 per cent compared with 2007, demonstrating the sharp contrast in fortunes between Turkey and the eurozone, where summer sales of euros dropped by over 14.2 per cent.

As a consequence, not only did the Turkish lira overtake the Australian dollar to become the Post Office’s third-placed best seller behind the euro and US dollar, but the country also overtook Spain to become Europe’s top destination.

The runaway success was fuelled by a stable exchange rate which made Turkey one of the few destinations where the pound stretched further in 2009. During the peak summer period sterling bought around 16 per cent more Turkish lira, while the current exchange rate of £1:2.24 lira is over seven per cent stronger than a year ago.



However, Sarah Munro sounded a word of caution about holiday costs in the country: “Turkey was one of the best value destinations in our cost of living surveys during 2008 but prices increased quite significantly over the past year. Holidaymakers should be aware that resort living costs have risen and are now 68 per cent higher than in Spain, the cheapest eurozone destination.”

Turkey’s towering performance overshadowed the steady rise of another non-eurozone destination. Based on Post Office currency purchases, Croatia overtook Bulgaria to become the top-placed Balkan beach resort in 2009, putting on 17 per cent more sales than in 2008 – with an even greater year on year growth of 21.5 per cent during the July and August summer peak.

It was all the more remarkable that Croatia became the Post Office’s fourth fastest growing currency in 2009, rising to 14th place in its top twenty bestsellers, when set against a 16 per cent exchange rate drop for sterling against the Croatian kuna over the past two years.

Overall it was a mixed year for Eastern Europe. On one hand Romania continued to gain ground as a cheap ski destination – rated best on price in the Post Office Ski Resort Report – and 15 per cent more Romanian leu were purchased through the Post Office. On the other, the long term weakness of sterling against the koruna brought a ‘reality Czech’ to Prague, previously regarded as a jewel in the city break crown.

As the city breaks market took its predicted nosedive in 2009, the Czech capital appears to have been one of the biggest losers. Despite rating as one of the cheapest cities for meals, drinks, cultural attractions and sightseeing in successive Post Office surveys, the strength of the Czech koruna meant that Prague was no longer viewed by UK tourists as a cheap choice – even though hotel rates were being heavily discounted in 2009.

The cold reality is that sterling has lost 42 per cent of its value against the koruna since February 2007. A resulting slump of 31 per cent in currency sales over the past 12 months merely compounded a 26 per cent fall the previous year and saw the koruna drop out of the Post Office top ten currencies for the first time since its records began.

Long haul holidays – how low could they go: With prices well documented as rivalling short haul trips, holidays further afield were the travel market’s bargain basement during 2009, reaping the benefit of increased sales at the expense of falling eurozone demand.

Bargains for UK holidaymakers came at the expense of profit margins for airlines and hotels, both cutting costs to fill seats and beds. British Airways was one of many to report heavy losses in 20097 but the benefit, for the time being at least, was that some of the world’s most aspirational destinations were brought within the reach of many more consumers.

Post Office currency sales underlined the buoyancy of both mid and long haul destinations, with some of the biggest growth recorded for the Kenyan shilling, Egyptian pound and a host of Far East destinations led by Thailand, Indonesia and Malaysia (see Figure 5).

Kenya completed its road to recovery in 2009 after the January election riots damaged tourism for the rest of 2008. The bounce back came early in the year as hoteliers fought back with accommodation discounts and by February the Post Office was reporting a 152 per cent year on year rise in sales of Kenyan shillings. Full year sales put the Kenyan currency at the top of the leader board as the Post Office’s Fastest Growing Currency of the year with annual growth of 78 per cent.

But it was Egypt and the Far East which led a late charge with accelerating currency sales in the second half of 2009. While Egyptian pound sales plummeted by 8.7 per cent in the first five months of the year, they rose by over 23 per cent between June and November. The same was true for the Thai baht which saw an early year sales drop of 2.8 per cent, before recovering to show growth of 26 per cent for the second half of 2009.

Sarah Munro said: “We saw the same pattern emerging for other long haul currencies, with second half gains making up for losses earlier in 2009. The common denominator for this recovery was the proliferation of bargain packages, which put Egypt, Thailand and Bali, in particular, in contention with European resorts for summer holiday sales.”

As a result of some of the cheapest ever package prices to Bali, Post Office sales of the Indonesian rupiah rocketed and the currency recorded annual growth of 38 per cent, making it 2009’s third Fastest Growing Currency.

Figure 5: Four year value sales growth for key long haul destinations between 2009 and 2005

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Singapore dollar

Malaysian ringgit


Kenyan shilling

Hong Kong dollar

Thailand baht

Egyptian pound

Chinese yuan

Indonesian rupiah

UAE dirham

Growth (%)


In the past two Holiday Money Reports, the Post Office reported sharp increases in holiday money sales for Dubai and Hong Kong. In a year when dollar destinations, so-called because their currencies float with the US dollar, were expected to suffer alongside the American currency, both continued to gain ground, albeit at a slower rate.

The UAE dirham put on five per cent more sales than in 2008 on the back of the first ever reported package discounts for cash-strapped Dubai, and sales of the Hong Kong dollar increased by a modest one per cent.

Some other dollar destinations pulled back at a more dramatic rate. In November, for example, sales of Jamaican dollars rose by 111 per cent year on year while 57 per cent more Barbados dollars were sold by the Post Office.

An interesting curtain-raiser to what might happen during the World Cup in 2010 was the pattern of currency sales for the South African rand. After a disappointing 2008, when sales shrank one per cent even though the rand was one of very few currencies to weaken against sterling, 2009 saw a revival in South Africa’s fortunes with a nine per cent rise in currency sales. However closer inspection shows that this was largely due to a 176 per cent year on year growth in June – the month when the Lions rugby tour took place.

Cutting back on cash: As the year got underway, travel industry pundits suggested that UK holidaymakers would hang on to their holidays at all costs but would cut back on the overall level of expenditure. Certainly the evidence suggests that tourists were careful with the amount spent on the holiday ‘package’ itself, with tour operators reporting growth for all-inclusive trips and late discounted deals. However there were mixed messages when it came to holiday spending money.

An increase in the average Post Office foreign exchange transaction during 2009 suggests

that consumers understood the weak pound would

buy them less currency than

it had done a year

before.

However the relatively small rise in expenditure to £266.73 – an average increase of only 4.9 per cent over 2008 levels – meant that most holidaymakers had less cash in their pockets.

For example, in July 2009 when the average transaction rose to £292.77 (+6.4 per cent on July 2008), the pound was worth nearly 10 per cent less year on year against the euro. As a result holidaymakers travelling at that time had at least three per cent fewer euros to spend.

The continued growth of usage for the pre-paid Post Office Travel Money Card was another indicator of a move to greater prudence in holiday budgeting. Available for loading euros, US dollars and sterling, sales of the card again grew during 2009 with a 23.5 per cent increase during the peak months of July and August.

But not all UK holidaymakers were so cautious in planning ahead. Many left it until the last minute and changed money at the airport, wasting an estimated £20 million on euro purchases during the year.8

Sarah Munro explained: “Our research revealed that tourists buying euros at UK airports wasted an average of £11.17 each by paying commission and getting lower exchange rates. We compared rates at eight UK airports with those offered in Post Office bureaux de change branches and found that holidaymakers got fewer euros for their pounds at the airport – and that was before they were charged a minimum of £3 commission.”

Another interesting anomaly was the changing pattern of currency buy-back purchases in Post Office branches. In late September and early October the pound slumped to near parity with the euro just as it had done in December 2008 and January 2009. Yet in stark contrast to the record levels of pound purchases made then, holidaymakers returning from their summer trips to the eurozone failed to cash in on sterling’s weakness.

Sarah Munro said: “Given the record year on year growth of 133 per cent in the volume of euros changed back into sterling in Post Office branches at the beginning of the year, we were surprised that people returning from their summer holidays did not cash in on the weak pound to get more money back on their left over euros.”

Over a 20 week period from late July, the Post Office recorded an 11.3 per cent year on year drop in the level of foreign currency changed back into pounds – even though changing €100 back might have netted people as much as £11 more than a year ago.

Considering the reasons for this, Sarah Munro said: “It could have been that people were holding on to their euros for Christmas shopping trips or skiing holidays. Alternatively it could be more to do with changing currency purchasing habits. Tourists may have planned their holiday spending more carefully and made sure they kept to their budget, leaving no left over euros. Of course, it could also be that they had no left over euros because they underestimated costs abroad!”



WHAT’S IN STORE FOR TRAVELLERS IN 2010?

Travel motivators for a jittery age:

The pre-Christmas collapses of Scottish travel group Globespan and Allbury Travel, parent company to Cyprus, Greece and Egypt specialists Libra and Argo, may have been a bad omen for the new decade but there still remains cautious optimism that the UK travel market can ride out the recession.

The latest World Tourism Barometer from the United National World Tourism Organisation9 suggests the decline in international tourism may have bottomed out, while more than three-quarters of Association of Independent Tour Operators members say they expect bookings to increase or remain on a level pegging for the year ahead10. Underpinning this view, a pan-European survey by Travelzoo revealed the UK to be the most resilient holiday market, with 55 per cent of consumers questioned planning to travel more in 2010 than in 200911.

In the mass market the Thomson and First Choice Trends Report established that over 80 per cent of people polled for its annual survey intend to take a 2010 break despite the economic climate, while almost a quarter (24 per cent) expect to spend more on their next holiday12. Elsewhere research suggested that more people will go it alone on solo trips rather than forgo a holiday13 and that the ‘grey’ market will throw caution to the wind, spending their children’s inheritance on holidays14.

Set against this upbeat mood are predictions of more travel company collapses15, the prospect of further strikes and the spectre of another hike in Air Passenger Duty (APD) to depress demand for long haul travel.

Little wonder that ABTA and the Parliamentary Transport Committee are calling for the safety net of financial protection to be extended to independent as well as packaged holidays – and signs too that consumers are becoming more aware of the dangers of unprotected DIY travel. The Thomson and First Choice survey revealed a doubling in the number of holidaymakers considering packages as a way to protect themselves against airline collapses – underpinning earlier Post Office Travel research showing the same trend.

One of the key motivators for travel in 2009 was the sheer volume of cut-price holidays which

allowed families to save hundreds of pounds because airlines and hotel groups were

forced to offer discounts. The move to make holiday money stretch further looks set to continue into 2010 as the so-called ‘Aldi Effect’, where record business by the no-frills supermarket is replicated for the holiday market, begins to bite.

As predicted in last year’s Holiday Money Report, consumers began

to trade down during 2009, bringing more demand for cheaper destinations,

out-of-season breaks, camping trips, budget

0 20 40 60 80 100

Brazil

New Zealand

St. Lucia

Antigua

Mexico

Australia

Barbados

Jamaica

Turkey

Italy

Cyprus

France

USA

Tenerife

Mauritius

Malta

Portugal

Greece

South Africa

Croatia

Egypt

Japan

Malaysia

Kenya

Czech Republic

Indonesia

Spain

Bulgaria

Thailand

Hungary

Data relates to exchange rates on 4 January 2010

Costs (£)

£35.72

£38.39

£39.12

£44.84

£48.06

£49.49

£50.17

£51.97

£58.52

£60.76

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£62.56

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£65.71

£67.92

£70.89

£71.12

£72.42

£72.52

£75.21

£79.74

£80.75

£81.10

£86.51

£87.62

£94.00

£100.04

£101.81

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Figure 6: Post Office Worldwide Holiday Costs Barometer - Survey of eight tourist items, including drinks and meals


accommodation and all-inclusive packages. More of the same can be expected in 2010 – with the prospect of increased pressure on the city breaks sector and an accelerated move to shorter holidays. Cruises also stand to benefit as a good option for holidaymakers who want to know exactly how much their trip will cost in advance of travel.

Post Office Travel Money’s Sarah Munro said: “2009 proved that consumers were increasingly canny in the choices they made, watching market movements, checking exchange rates and playing a waiting game for bargains. Research became the watchword, so much so that with the advent of Google Wave later this year, we expect social networking to play a more pivotal role in holiday choice – as a way for people to share experiences.”

Holiday hotspots for 2010: If 2009 confirmed a real taste among UK holidaymakers for travel to far-flung parts of the world, high profile events taking place in 2010 should feed this appetite and provide a positive platform for long haul destinations to sell their wares. Leading the way will be the Winter Olympics in Vancouver, the FIFA World Cup in South Africa and the opening of Universal Studios®’ Wizarding World of Harry Potter™ in Florida.

Although sterling has lost ground against their currencies, New Zealand and Australia can also expect renewed interest when their spectacular scenery again provides the backdrop to blockbuster films, led by the December release of the latest Narnia instalment – Voyage of the Dawn Treader – and the countdown to Peter Jackson’s Hobbit in 2011.

Whether the latest Mintel report is correct in arguing that long haul travel may be cushioned from any downturn,16 or whether the bubble will finally burst, is likely to come down to cost. As the Far East, Middle East, Africa and USA go head to head with Europe in the battle for holiday hearts and minds, price will, inevitably, be the deciding factor.

The big question is whether anywhere can outdo Thailand, which has reinvented itself as a ‘value’ destination and is again the cheapest long haul destination in the Post Office Worldwide Holiday Costs Barometer of 30 destinations (see Figure 6).

There are definite contenders. While a Thai ‘shopping basket’ cost under half that in the big four Caribbean Islands – Jamaica, Barbados, Antigua and St Lucia - Indonesia, Malaysia and Kenya are also challenging hard for ‘value’ business. Competitive pricing in the Far East and Kenya makes it likely that these will be 2010’s big hitters.

In Europe all eyes will be on whether Turkey can consolidate its new position as the UK’s top summer sun choice or whether the eurozone will strike back. Individual member countries of the eurozone, Europe’s most unpopular holiday club, have already resorted to discounting to redress the impact of the strident euro, but the fight will be on to see how Spain, Greece and France, in particular, play their cards to claim back bookings.

The evidence suggests the fight back has already begun as prices are down on 2008 in all seven eurozone countries surveyed for the Holiday Costs Barometer. A 30 per cent year on year price drop for tourist commodities shows that Spain means business - in sharp contrast to the almost 44 per cent price hike in Turkey, which has dropped 14 places in the table to 22nd position.

Encouragingly though, prices plummeted in 17 of 25 destinations previously surveyed for the Post Office barometer of living costs, with Hungary again cheapest overall and Bulgaria’s Sunny Beach the lowest priced beach resort.

A rating game for 2010 success: Exchange rates can make all the difference to the cost of holidaying abroad and, while 2009 was a gloomy year for sterling, the picture is changing and in recent weeks the pound has gained against virtually every important currency for UK tourists.

Its best performance has been against the Jamaican dollar (see Figure 7), where the sterling rate was consistently stronger over the past 12 months and now puts over 21 per cent more cash in the holidaymaker’s pocket. Jamaica is also the cheapest of the four big Caribbean islands in the Post Office Holiday Costs Barometer.

In the mid-haul market UK holidaymakers can also look forward to more cash for their pounds. Based on current rates, visitors to Egypt, one of 2009’s best value destinations, will get 14 per cent more Egyptian pounds than a year ago.

Other destinations whose currencies have dipped against sterling are Mexico, now fighting back after its swine flu epidemic, and Iceland, whose financial collapse impacted on the value of its currency. Holidaymakers visiting these countries can currently claim around five per cent more foreign currency for their pounds.

Sarah Munro said: “Consumers are now well versed in comparing holiday prices before making a booking and we would urge them to include a comparison of exchange rates for different currencies before coming to a final decision. These can make a big difference to the overall cost of a holiday.”

Figure 7: Currencies whose exchange rates have weakened most against sterling

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Czech koruna

Turkish lira

Thai baht

Croatian kuna

US dollar

Hungarian forint


UAE dirham

Egyptian pound

Jamaican dollar

Currency decrease (%)Data relates to exchange rates on 4 January 2010



Currency clues for the year ahead:

January: Not one but three culture capitals. Culture Vultures will have a choice of three European Capitals of Culture in 2010 as Turkey’s Istanbul, Pécs in Hungary and Germany’s Ruhr region line up to display their cultural heritage to the wider world. A year of events gets underway in January as all three seek to cash in on their cultural attractions – including UNESCO World Heritage Sites in each centre – to attract more short break visitors.

The most obvious winner in this curious three-cornered fight stands to be Istanbul, which has lined up an impressive calendar of artistic events17. Last year when Turkey became the most popular short haul destination for UK tourists – not

least because of the weakness of its currency against sterling

- Istanbul saw a 23 per cent rise in UK visitors

(January-August 2009)18.

However the cost of tourist items has risen sharply in Turkey and in marked contrast Hungary, cheapest of 30 countries surveyed for

the Post Office Worldwide Holiday

Costs Barometer, will benefit from

having a currency that has weakened by

9.4 per cent year on year against sterling. There is some

justification for thinking, therefore, that Pécs is limbering up for a cultural contest in which it could wrest the spotlight from Istanbul19.

The dark horse will be Germany’s Ruhr Metropolis, hampered by its eurozone status, but with a unique industrial heritage to showcase as it mounts its opening event in the former coalmining complex and World Heritage Site of Zeche Zollverein20.

All three will have to work hard to keep their prices down to the levels of Warsaw, Lisbon and Prague, the three cheapest cities in the 2009 Post Office Cost of Culture report, which surveyed the costs of a highbrow mix of galleries, museums, heritage sites and arts performances in 16 cultural capitals.

February: Winter wonderland spotlight for Canada. The Winter Olympics in Vancouver will provide the year’s first big sporting clash and the backdrop of British Columbia’s snowy landscapes could have a positive impact on Canada, which struggled to compete with neighbouring USA in the tourism game after sterling slumped against its dollar in 2009.

In December, for example, the Canadian dollar was almost six per cent stronger than 12 months before, at a time when sterling was showing year on year growth against most other currencies. The ski resort of Banff was also named most expensive of 14 surveyed for the annual Ski Resort Report.

However Canadian ski resorts are renowned as being particularly welcoming to families and the high profile that Whistler will receive during the Winter Olympics could provide just the boost needed.

February: What price Dubai? 2010 looks set to be the year when the bargains come thick and fast in Dubai and not just during the February Shopping Festival, this year celebrating its 15th anniversary.

In the wake of Dubai’s financial crisis, which hit the headlines in November after news broke of the largest state-controlled company Dubai World’s mounting debts, prices for many of the Emirate’s most prestigious five-star hotels have been slashed to three-star levels. Travel agencies have been inundated with the kind of low-price offers more common in Red Sea resorts and Dubai, one of the world’s glitziest destinations, is looking its cheapest ever.

That value is compounded by the drop in the value of the UAE dirham against sterling so that visitors to the 2010 shopping fest (28 January-28 February) can look forward to having nearly 13 per cent more cash to spend than a year ago.

Spring: Theme park wars hot up. The dates remain under wraps but the likelihood is that Sesame Street will go head to head with Hogwarts in April or May 2010 as Busch Gardens and Universal Orlando Resort open new attractions that will make Florida the centre of the universe for theme park fanatics, large and small.

Walt Disney World® is set to get a makeover too, with a major revamp of Fantasyland, but this is further in the future. For the meantime Sesame Street’s Elmo and Big Bird will have to fight hard for a share of the action as the Wizarding World of Harry Potter™ promises a magical experience at Universal’s Islands of Adventure theme park.


It all spells a great year ahead for Florida, which held its own during the rollercoaster ride that was 2009. After hanging out the sale signs and keeping prices extra low for families, operators believe that the Sunshine State is shaping up to be a big attraction this summer for families who previously took a short haul holiday to Europe. Prices, they claim, are comparable21 and Florida has the theme park trump card to boost business.

Away from the Sunshine State, new accommodation has flooded onto the market in both New York City and Las Vegas, which means increased competition and the likelihood of lower prices in two of the UK’s most popular city break destinations. In particular, the opening of the massive CityCenter leisure development and the new direct BA service to Sin City makes Las Vegas a tip for the top in 2010.

The only fly in the ointment is the prospect of a $10 entry fee for UK visitors. Passed by the US Senate,

the bill has yet to be ratified by the House of Representatives but could be introduced

during 2010 and add another increase to transatlantic travel costs.

June: Footballing fever. After England’s positive performance in the qualifying rounds and a draw that puts the nation’s football team in one of its best ever positions going into the finals, all eyes will be on South Africa as the FIFA World Cup gets underway on 11 June.

With 10 venues for the footballing finals, spread the length and breadth

of the country, South Africa has never had a better opportunity to spotlight its

diverse landscape and to take advantage of a television viewing audience of many millions

in the UK alone.

While a trip to the country this summer will be an experience mostly to be shared between serious

football fans, the real prospect for South African tourism to boom will come after the winning team lifts the cup. That is exactly how tour operators see it, with many revamping their programmes to include areas of the country that have seen significant development in the tourism infrastructure during the run up to the World Cup.22

A more worrying issue for the travel industry is the prospect that holiday bookings could be hit hard in June as the nation stays home to watch the football. There have already been reports that leading tour operators like Tui Travel will discount tactically to stimulate demand23 and, if so, this will benefit all those for whom the idea of a month of non-stop footballing fever is seriously unwelcome.

The most likely beneficiaries - the ‘no shoes, no news’ islands in the Maldives and the Caribbean would seem the best bets.

Summer: Peace in our time. The noughties were a decade when political unrest disrupted tourism to many parts of the world – but nowhere more so than in Sri Lanka where the long-running war with the Tamil Tigers erupted with devastating regularity. In May 2009, however, the civil war finally came to an end and Sri Lanka tourism has stormed ahead since with UK arrivals up 17 per cent in August and 12 per cent in September24.

Costs remain low in the country and package holidays to Sri Lanka have been great value over the past six months with operators predicting more of the same for 201025.

Sarah Munro said: “Sri Lanka is great value and should be a strong contender for budget long haul business. However visitors planning trips need to be aware that there are stringent currency restrictions, which mean that a maximum of 1,000 SL rupees can be imported or exported – the equivalent of under £10. We recommend that UK tourists take US dollars in cash or travellers cheques, ensuring that they keep within the permitted maximum of $5,000.”

December: To shop or not? For the past three years the USA – and New York in particular - has been the place for dedicated followers of fashion to do their Christmas shopping, whatever the exchange rate.

Even though intrepid shoppers were more likely to have received $1.50-1.55 for every pound than the eye-popping $2 of yesteryear, the most recent Post Office Christmas Shopping Guide showed that mouth-watering savings of as much as 67 per cent26 were still available on fashion items in the Big Apple during December 2009.

And the prospects look good for 2010. Thanks to a combination of New York store discounts and a glut of accommodation to keep hotel prices down, UK shoppers should find that their pounds will again stretch further in Fifth Avenue than in Knightsbridge. Better still, the 2009 increase in the duty free allowance between the UK and USA to £340 means holidaymakers can bring back more gifts without paying duty on them.

Shoppers planning shorter forays to Europe are likely to find prices lower in Prague, Warsaw and Budapest than in eurozone cities, according to the Post Office Christmas Shopping Guide. The message remains, however, to check prices carefully before travel to bag the best bargains.



What is available from the Post Office during 2010:

• News briefings on topical currency-related stories.

• Prompt response to enquiries about currency movements or rates and requests for trend data on currency sales, including comment from Post Office travel money experts.

• Regular travel and currency reports. For 2010 these will include:

Spring: City Costs Barometer - trends in European city breaks, past and future

Best Value Holiday Destinations for 2010 – rate movement survey

Holiday Costs Barometer – living costs comparison survey covering the most popular destinations for UK tourists

Summer: Motoring on the Continent – fuel price survey for motoring holidays in 12 countries

Fastest Growing Currencies – a report on currencies that are setting the pace in Post Office branches

Family Beach Barometer – a cost comparison report on how prices stack up for families travelling to beach resorts in summer 2010

Autumn: The Long Haul Holiday Report – the prospects for long haul destinations as the Post Office compares living costs and exchange rates for top performers

Winter: Ski Resort Report – costs comparison survey of 14+ international ski resorts

Christmas Shopping Guide – just how much UK holidaymakers can save.

About Post Office Travel:

The Post Office is the UK’s largest travel money provider and offers over 70 different currencies with 0 per cent commission on all foreign currency and travellers’ cheques.

29 currencies are available on demand at 1,600 larger Post Office branches, whilst an additional 2,600 branches offer US dollars on demand and a total of over 8,500 branches offer euros on demand. Currency can also be pre-ordered at all 12,000 branches or online for branch or home delivery at www.postoffice.co.uk.

The Post Office pre-paid Travel Money Card offers customers a secure and convenient way to carry euros, dollars or sterling.

The Post Office Credit Card charges 0 per cent commission for all purchases made overseas and also offers customers the flexibility to pay for two large purchases at any time at a discounted fixed rate – ideal for splashing out on holiday.

The Post Office also provides a range of other great value travel services including single trip and annual travel insurance policies, passport and EHIC Check & Send services and international money transfers.

For more information visit your local Post Office branch, go to www.postoffice.co.uk, or call 08457 223344.


Sources

1 YouGov consumer survey of 2,255 long haul holidaymakers for Post Office Travel Money, August/September 2009. 21 per cent who previously travelled independently were considering package holidays.

2 Jetsave analysis of self catering holiday package costs for a family of four in June 2009, comparing Florida with Spain.

3 Survey of accommodation costs worldwide by Hotels.com, October 2009.

4 TTG Knowledge: USA destination report, November 2009.

5 YouGov consumer survey of long haul holidaymakers, August/September 2009.

6 Office for National Statistics reported a 14 per cent year on year drop in visits to Europe in the 12 months to September 2009.

7 British Airways reported a pre-tax loss of £292 million for the six months to September 30 2009 with revenue down 13.7 per cent. IATA also reported that airlines lost more than £3.7 billion in the first half of 2009.

8 Post Office research established an average wastage of £11.17 per exchange transaction. Sources: International Passenger Survey, Office of National Statistics, Post Office and Ipsos-Mori foreign exchange omnibus on number of currency transactions made annually in the UK and airports’ market share of this. The exchange rate differential was calculated by taking the mean average from cost comparisons at eight UK airports on three separate days with Post Office branches (excludes currency pre-order and pick up at airport).

9 www.unwto.org

10 Association of Independent Tour Operators annual conference, November 2009, reported in Travel Weekly, 27 November.

11 Annual subscriber survey by Travelzoo, conducted 22 November-7 December 2009.

12 Thomson and First Choice Trends Report of 917 consumers, September 2009. http://www.firstchoice.co.uk/media/thomson-and-first-choice-trends-report.pdf

13 Survey of 4,000 UK adults by ebookers.com (November 2009) revealed that one in six tourists travelled alone.

14 Poll of 1,000+ people who took a summer holiday in 2009 by World Travel Market showed that the over-60s made up nearly two-thirds of the 54 per cent of people who declared holidays sacrosanct.

15 Plimsoll Publishing predicts that up to 300 tour operators could fail or be taken over in 2010 after analysing the performance of 1,000 UK tour firms and finding that the recession cost £2.1bn in lost profits in 2009.

16 Mintel report on long-haul air travel.

17 www.istanbul2010.org

18 www.gototurkey.co.uk Turkey News Winter 2009.

19 www.pecs2010.hu

20 www.ruhr2010.de

21 Source: Jetsave Trends Report December 2009.

22 Source: Hayes & Jarvis Africa programme 2010.

23 TUI Travel plans reported in Travel Trade Gazette, 4 December 2009.

24 Source: Sir Lanka Tourism Promotion Board.

25 Source: Hayes & Jarvis and comment by Kuoni in December issue of Selling Long Haul.

26 www.postoffice.co.uk/shoppingguide2009: Abercrombie & Fitch shirt: £70 in London compared with £23 in New York.

For further information please contact:

Christine Ball PR T: 01798 874177 E: [email protected]

3 Monkeys Communications T: 002 7009 3100 E: [email protected]

Hayley Fowell, Post Office Press Office T: 020 7250 2417 E: [email protected]

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