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In-resort prices have dropped by almost a third in more than half of resorts and cities worldwide with the Portuguese Algarve now cheapest for UK tourists.

A 19% price fall makes Cape Town the best value for long-haul travellers over Bali.

Australia, Costa Rica, Iceland, Vietnam and Peru are named among 10 hotspots for 2016 as the Post Office reports surging demand for their currencies.

The cost of eight tourist staples, including meals and drinks, has fallen in 23 of the 44 key worldwide destinations surveyed by Post Office Travel Money in a report published today (Friday).

The strength of sterling is cited as the main reason, although local price cuts are a contributory factor in 13 destinations.

The tenth annual Holiday Money study reports falls of 15%-20% in 10 destinations, and a 31% drop in Penang, Malaysia to £64.05.

But the dominant dollar – currently worth 3.2% less than a year ago – has had a negative impact on the prices tourists will pay in the US.

Orlando (£68.54) again emerges as best value, although prices are up almost 9%. Boston (£79.88) is the least expensive of four US cities surveyed, with San Francisco at £86.01, New York, £86.15 and Washington, £90.71.

UK tourists travelling to most Caribbean islands and the Gulf region also face rises because their currencies float alongside the dollar and have strengthened to a similar degree against sterling.

Prices are highest in Dubai (£150.38), while two of the most popular Caribbean islands – Antigua (£134.94) and Barbados (£117.50) – are also more expensive. 

Jamaica registered the biggest price rise of more than 30% in Montego Bay at £100.91.

The Algarve at £29.32 makes it the cheapest destination for UK travellers for the first time in five years, with prices down by more than 18% year-on-year. The area is one of eight European destinations that dominate the best value top 10 for the second year running.

The Bulgarian resort of Sunny Beach registered a similar 18% fall to £29.49.

By contrast, some local shop and bar prices have risen in the Costa del Sol to £35.61.

Prices in Cape Town at £34.55 are down 20%, making it lowest-priced of 32 long-haul destinations surveyed and third cheapest overall. Sterling is now worth 28% more than a year ago, equating to £111 extra cash on a £500 purchase of South African rand.

Bali at £40.35 retains its top 10 position but local prices are on the rise. Although sterling’s continuing strength against the Indonesian rupiah cushions the blow, local costs have risen nearly 6%.

Last year’s best value destination of Prague at £40.19 is almost 14% more expensive year-on-year due to rising meal costs against city break rival Budapest at £39.40.

Three eastern Mediterranean resorts – Marmaris (£38.83), Paphos (£41.58) and Corfu (£43.42) – are also rated as among the top 10 most affordable destinations.

Just outside the best value top 10, prices have dropped 18% compared with a year ago in Tokyo at £46.58.

Andrew Brown, of Post Office Travel Money said: “If sterling continues to hold its value, UK holidaymakers will have plenty of choice in the coming year.

“In Europe the best deals are likely to be in Portugal and Bulgaria, where increased competition to attract tourists has resulted in lower prices for tourist staples.

“Once the exchange rate is factored in, tourists should see their spending costs shrink. For those travelling further afield, Cape Town, Bali and Tokyo look good bets for the bargain hunter.”

He added: “When you look at many of the fastest growing currencies over the past year, it is clear that the strength of sterling has played an important part in determining holiday choice.

“The evidence suggests that holidaymakers have been doing their homework before booking and checked to see where their pounds would stretch further.

“Aspirational destinations like Australia, Peru and Japan have become more affordable and are among the most obvious beneficiaries of this.

“The Costa Rican colon was the Post Office’s fastest growing currency of 2015 with sales up 46% while demand for the Icelandic krona has mushroomed by 276% in the past five years – taking it into the top 20 bestsellers for the first time.

“New flights to Costa Rica and Iceland are expected to help boost demand still further in 2016.”