Holiday Euro Spring 2008:
Holiday euro only benefiting from strong appreciation overseas
- Popular holiday destinations still suffering from even higher inflation than Austria
- Strong euro translates to increased holiday funds primarily overseas
- Holiday euro worth almost as much in the USA as in Turkey
- Particularly significant increases in South Africa, Mexico and Hong Kong in addition to the USA and the UK
"Holiday travellers will only be able to escape high inflation in overseas destinations and in Great Britain," says Stefan Bruckbauer, an economist at Bank Austria Creditanstalt (BA-CA). Although many holiday destinations that are popular among Austrians have exhibited a somewhat lower level of inflation than that seen in Austria over the last twelve months, the difference is insignificant. At the same time, many other popular holiday destinations have experienced higher inflation combined with currency appreciation, such as Turkey, where the lira has appreciated against the euro. Travellers can profit from somewhat lower inflation in Germany and France: the holiday euro is worth a bit more in both of these countries this year. However, the holiday euro is worth significantly less in Turkey and slightly less in Croatia due to high inflation and appreciation against the euro in both countries.
"Weighted by the popularity of the various holiday destinations, the holiday euro is worth roughly 2 per cent less in the spring of 2008 than it was a year ago," adds Bruckbauer. This figure represents a continued historic low for the holiday euro. The economists at BA-CA calculated the value going back to 1990. At the moment, the strength of the euro is only having a positive impact for overseas destinations. The only exception among the popular European destinations is Great Britain, where currency depreciation and low inflation have increased the value of the holiday euro by 10 per cent, making the euro worth noticeably more in Great Britain than at home for the first time in ten years.
"In the summer of 2008, the holiday euro will continue to be worth the most in Turkey, despite the depreciation of the euro against the lira. This is followed by Hungary and Croatia, with the USA coming in higher than usual at fourth place," says the BA-CA economist. "This year the holiday euro is hardly worth more in Portugal, Spain, Canada, France, Germany and Italy than in Austria." Despite the depreciation of the franc, travellers will get less for their holiday euro in Switzerland (85) than in Austria.
The fact that the USA is fourth among the most popular destinations for Austrians in terms of the value of the holiday euro is clearly due to the strong development of the euro, which continued to appreciate against the dollar, increasing by 11 per cent since the spring of 2007. Overall, the holiday euro is also worth significantly more than it was a year ago in other overseas destinations that are popular among Austrians. "According to our calculations which are weighted by popularity, the holiday euro is worth roughly 9 per cent more for overseas destinations in the spring of 2008 than it was a year ago," says Stefan Bruckbauer.
At the moment, travellers can particularly profit when travelling to South Africa, where higher inflation has been outweighed by the depreciation of the rand against the euro. However, travellers can also take advantage of the strength of the euro in South and Central America, with the exception of Brazil, whereby Mexico and the Dominican Republic represent particularly attractive destinations. The value of the holiday euro also increased in Asia, although somewhat less than on average. While the value of the holiday euro has increased at an above average rate in Hong Kong, it has only increased at an average rate in Thailand and a below average rate in China and Japan.
In conclusion, the economists at BA-CA would like to point out that these figures are average values that could differ for individual regions (such as the central region of London, for example). In addition, the price levels refer to the average price of goods and services in the individual countries; the prices for individual products could differ substantially (especially for tourists). Therefore, no values are listed for holiday destinations, but rather just the changes in value. Furthermore, the fact that the price levels are so much more affordable in some holiday destinations than in Austria is primarily due to the high income level in Austria. If the price level were lower in Austria, the income level would also be lower – many of us would most likely not be able to afford to go on holiday at all.
Enquiries: Bank Austria Creditanstalt Economics and Market Analysis
Stefan Bruckbauer, Tel. +43 (0) 50505 ext. 41951