Consumers appear unfazed by the fall in the value of the pound when it comes to booking overseas holidays, says Liam Hodge, head of insight for First Rate Exchange Services
The exchange rate of sterling has scarcely been out of the headlines since the pro-Brexit vote last June.
Much has been made about its 20% fall in value compared with its robust strength in 2015, but just how much does the weak pound actually shape consumer behaviour when it comes to travelling abroad on holiday?
At this stage, it does not seem to have had much of an impact. When we asked respondents to our latest Holiday Confidence Index survey whether they were less likely to book an overseas holiday as a result of the weakness of the pound, just 14% said that the sterling slump had put them off and 55% actually disagreed that it had deterred them from planning trips abroad.
What is more, the research indicated that less than one third of holidaymakers even consider the exchange rate for their destination when planning trips abroad.
If that is the case, and as long as sterling does not take a dramatic turn for the worse, then perhaps there is less need for concern about the current rates of exchange.
Instead, we might look at the thorny question of where holidaymakers will get the best overall value in the coming year and advise them accordingly. The cost of flights and accommodation is a major consideration but so too should be the additional price to be paid once UK tourists arrive at their destination – and holidaymakers are becoming increasingly aware of this.
There is growing evidence that holidaymakers are booking destinations like Costa Rica and Bali because local costs are low. The currencies for these countries topped the most-recent Post Office list of fastest-growing currencies and low resort prices are likely to have played a significant role in that.
The same applies to Cancun in Mexico and Hoi An in Vietnam. A quadrupling of Post Office sales of the Vietnamese dong in the past few years suggests holidaymakers are becoming increasingly savvy in choosing destinations where they can eat and drink at a mouth-wateringly low cost.
While value is a priority, holidaymakers do not appear to be put off by the prospect of having to pay a bit more for their holiday.
Just over half (53%) of consumers who took part in the latest Holiday Confidence Index research said they were planning trips abroad in the year ahead, and they appeared to be realistic about the amount they will need to spend, with more of them increasing their holiday budgets for the coming year.
At the same time, there was a significant fall in the volume of people who expect to be able to restrict spending to the same level as on their last holiday.
What this points to is a general unwillingness on the part of holidaymakers to compromise their holiday standards.
When people say they are prepared to spend more, this is to ensure they can maintain the same quality of experience enjoyed on previous holidays, and this becomes more marked as people get older.
While the youngest group of consumers surveyed, 18-24 year-olds, are feeling the pinch and are therefore likely to cut back on holiday spending, affluent holidaymakers aged 25-34 are more likely to spend additional funds on trips abroad than any other age group.
The good news for the travel industry is that a large proportion of consumers remain determined to book holidays abroad – even if they may have to pay a little more – and for many, the benefit of a destination that offers great value for money far outweighs the additional costs created by current exchange rates.