On Monday, the pound plummeted to a record low. After the new UK Chancellor’s mini-budget damaged market confidence last week, it seems likely that the currency will remain down for some time.
This is bad news for Brits, including those paying off mortgages and others already dealing with spiralling energy expenses (most of us). What does this mean for tourists who wish to spend their hard-earned pounds abroad?
Simply put, the decline in the value of the pound means that your money will not go as far on expenses like dining out and accommodation.
British tourists in the United States will be disproportionately affected. As a result of Chancellor Kwasi Kwarteng’s tax cuts, the pound plummeted to a 37-year low against the dollar on Monday, falling to $1.0327. As of Wednesday morning, it had recovered slightly to approximately $1.06.
Tourists now face an applicable exchange rate of approximately £1 = $1, with a currency worth approximately 20% less than in October.
And it’s not just those travelling to the United States whose purchasing power will decrease. Several other nations, notably the popular winter destination Barbados and the 2018 World Cup host nation Qatar, also peg their currencies to the dollar.
However, people are reluctant to cancel their vacation plans simply because the pound has been on its own journey.
A spokeswoman for ABTA (Association of British Travel Agents) told Euronews Travel, “After over two years of harsh travel restrictions, there is still substantial pent-up demand for international travel.” Customers have frequently told us over the years that vacations are one of the last things they will sacrifice when attempting to reduce budgetary strains.
So, whether you’re travelling east or west this fall or winter, here’s what you need to know.
How is the weak pound affecting airlines?
In addition to making locations more expensive, a weakening pound may result in a higher airfare.
Because aviation fuel and aircraft leases are usually priced in US dollars, airlines outside the United States must pay more to refuel when their home currency depreciates.
However, it may be some time before airlines must pass on their increased expenses to passengers. EasyJets Johan Lundgren CEO told the BBC that the low-cost airline is in a favourable position because it “hedged,” or purchased gasoline at a predetermined price.
In the meantime, the CEO of Virgin Atlantic, Shai Weiss, has encouraged Prime Minister Truss to make “tough decisions to reverse the devaluation of the pound.”
According to the CEO, Virgin could survive the financial storm because precautionary measures have been taken against a weak pound and rising fuel prices.
However, he said, “Like everyone else in the country, we are concerned about the current economic climate in which we operate,” according to Travel Weekly.
The pound weakening is detrimental to the economy, consumers, and the vicious inflationary cycle we are currently seeing.
Where may British citizens vacation most affordably with the weak pound?
Despite the poor economic picture for the United Kingdom, it is still feasible to get inexpensive vacations by shopping around.
“There are alternatives for clients to reduce the expense of their trip, such as making reservations in advance. If they are concerned about exchange rates, ABTA recommends all-inclusive package vacations, which are readily available at many global destinations.
Despite that the current exchange rate of the pound is weak, many countries – especially those surrounding the Mediterranean, where we spend the majority of our vacations abroad – offer significantly more affordable holidays than the United Kingdom.
Currently, Turkey is the location with the lowest prices. Although the pound is weakening versus the lira, it has strengthened dramatically over the past year, from 12 lira per pound to nearly 20. (a 64 per cent leap).
Argentine, Sri Lankan, Hungarian, and Swedish rates are also relatively favourable, as does Japan, which will reopen to tourists in its whole next month.
How are European visitors to the United Kingdom affected?
The euro is also performing poorly, reaching a 20-year low against the dollar on Monday due to concerns over the region’s escalating energy crisis.
Consequently, EU citizens may likewise observe a decline in their purchasing power in the United States.
However, they may take advantage of Britain’s troubles to obtain discounts in Britain. With the pound currently trading at 0.9 to the euro compared to a 2019 average of 1.01, typically costly hotel rooms in London will appear far more appealing to French tourists.
As a result of the reduced value of the pound, the United Kingdom is currently “on-sale” for those who wish to visit at a reduced price.