The Algarve has returned to the top of a worldwide holiday costs league for the first time in nine years, as food and drinks prices remain low in the Portuguese region.
According to the 19th annual Holiday Money Report from Post Office Travel Money, the cost of eight tourist items, including drinks and meals, is £58.95 in the Algarve.
The most expensive destination is New York, where the same items come to a total of £167.85.
The report also reveals the results from a poll of 2,001 adults in the UK, which found 60% of those surveyed about their holiday plans for the coming year said they will be travelling abroad – up from 51% a year ago.
Almost three-quarters (73%) of them will holiday in Europe, while more than two in five of those planning to travel abroad have already booked their trip.
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Almost half (44%) of those who said they are travelling abroad in 2025 have already booked their trip.
A quarter (26%) are waiting to see whether they can secure a discount on a late booking, while almost one in five (18%) say they need to save more money before booking their trip.
The report also revealed that 29 of Post Office’s 30 bestselling currencies have weakened against sterling over the past two years.
In its biggest ever barometer of costs in 47 destinations worldwide, Post Office Travel Money found that prices for eight items – a three-course meal for two with wine, cup of coffee, bottle of local beer, can of cola, glass of wine, bottle of still water, suncream and insect repellent – are down in half of the resorts and cities also surveyed a year ago.
The biggest price fall is in the Dominican Republic, the only Caribbean island of seven in the barometer to make the top 20, reaching 19th place.
At £93.09, prices in Punta Cana have fallen by more than 26%.
Sterling’s strength against the euro – up 1.8% year-on-year and 6.3% compared with March 2023 – has also helped to reduce prices for British visitors.
Laura Plunkett, head of travel money at Post Office, said: “It’s interesting to see the Algarve back at the top of the barometer chart again and this is largely down to the remarkable consistency in its low prices for meals and drinks.
“Even though the Algarve has featured in the best value top 10 since 2010, it has struggled to match the cheapest long-haul destinations on price in recent years.
“Now prices have risen in its closest competitors but remained low in Portugal.”
Cape Town in South Africa retained runner-up position with a barometer cost of £59.84, albeit 11% higher than a year ago.
In third place, Japan’s capital city, Tokyo, has moved up one place, but prices have also risen by 7.4% to £63.34.
Bali (£66.88) has moved up from eighth to fourth place, but prices are 5% higher year-on-year.
At £92.78, prices near the US/Canadian border in Toronto are almost half those of the same items in New York.
In 18th place, Toronto is rated the best value of eight new destinations featured this year.
Plunkett added: “Despite fluctuations and some uncertainty about sterling when it fell against key currencies earlier in the year, it has now bounced back from its January dip and currently looks stable.
“More encouragingly, the two-year rate comparison in our Exchange Rate Monitor shows that sterling has risen in value against practically every holiday currency since March 2023. This is a reassuring trend for holidaymakers.”
The biggest year-on-year gain for sterling has been against the Mexican peso.
Post Office Travel Money Worldwide Holiday Costs Barometer
Survey of eight tourist items, including drinks and meal
Algarve £58.95
Cape Town £59.84
Tokyo £63.34
Kuta, Bali £66.88
Delhi £69.52
Sunny Beach £71.46
Hoi An, Vietnam £73.23
Prague £75.92
Phuket £76.10
Costa del Sol £76.51