Cost of European holidays will soar as pound's value plummets against Euro


Last updated at 08:46 24 March 2008

The cost of holidaying in Europe will soar this year as the value of the Pound continues to slump against the Euro, analysts have warned.

The strength of the Euro means travellers are already paying far more for accommodation, food and shopping compared to last year and this is expected to worsen.

Six months ago it cost £67 to buy 100 Euros. This has now increased to £78 - a rise of more than 16 per cent.

It means a typical three course meal for two in a French restaurant that cost £62(CORR) in September will now set holidaymakers back £72.

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Financial experts believe the Pound could slip at least another ten per cent in 2008, pushing the cost to more than £79.

People looking to move abroad or buy holiday homes have also been affected.

A 150,000 Euro two-bedroom apartment in Spain that cost a UK purchaser £105,000 last year now costs £122,000 and could rise to at least £134,000.

Britons are already struggling with painful increases in mortgages and food and fuel prices.

Another burden on travellers is the introduction by some banks of a flat fee every time a debit card is used abroad, on top of foreign exchange fees they already pay.

The impact was seen during the Easter get-away this weekend, with just over 1.3 million people travelling abroad, compared to nearly 1.6 million a year ago.

Kevin Mountford, a financial expert at, said: 'This is having quite an impact.

'Tourists now have to be careful not to leave their currency exchange until the last minute.'

The pound has gone into freefall against the Euro because international investors have lost faith in a currency that is facing an uncertain future over the international credit crunch.

Interest rate cuts also reduce the potential income for investors. The Bank of England has already made two quarter point cuts to 5.25 per cent in recent months and more are expected.

Henk Potts, equity strategist with Barclays Wealth, said: 'Sterling will take a pounding against the Euro during the course of this year due to the deteriorating economic picture, the Bank of England cutting interest rates and the trade deficit.

'Shrewd holidaymakers these days need to spend as much time looking at the foreign exchange markets as they do hunting for bargains on the internet.

'The wise holidaymaker will avoid the Eurozone and head towards the U.S., because the pound is incredibly strong against the dollar.'

Even if Sterling did rally over the coming months, package holidays will remain expensive as tour operators set prices with accommodation providers in advance, meaning they will have to pass on the cost of current currency rates.

Research by the Post Office suggests holidaymakers will increasingly switch to short city breaks abroad to offset rising costs.

Popular destinations are likely to include Budapest in Hungary, where the forint has strengthened eight per cent against the pound - less than any other Eastern European currency - and cheap destinations like the Estonian capital, Tallin, and Dubrovnik in Croatia.

Post Office head of travel Helen Warburton said: 'It's all about cost. After Black Monday, many people had to cut back on expenditure and there was a strong growth trend in two or three night short breaks.

It was much cheaper to go on two or more breaks during the year then to take a two-week holiday. With a credit crunch widely forecast, UK holidaymakers may well follow the same route this year.'

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