Holiday Euro Spring 2010:
Holiday euro worth less than a year ago, particularly overseas
- Virtually no countries more affordable, many destinations considerably more expensive
- Hungary, Turkey and Croatia still affordable despite inflation
- South Africa and South America significantly more expensive than a year ago
"The value of the holiday euro has decreased significantly compared to last year, particularly in far-off destinations," said Stefan Bruckbauer, chief economist at Bank Austria, summing up the most recent calculation of the holiday euro. This is due to the considerable appreciation of many currencies since the spring of 2009. As a result of the uncertainty caused by the financial crisis, many countries saw their currencies depreciate dramatically in the spring of 2009, which increased the value of the holiday euro substantially in these countries. Because the situation has eased since then, however, the exchange rates of many currencies have improved against the euro. "The clear stabilisation of many countries' exchange rates following the crisis and the simultaneous mild depreciation of the euro have made the holiday euro considerably weaker in many countries compared to the spring of 2009," said Bruckbauer, explaining the decline in purchasing power in foreign holiday destinations. Overall, the value of Austrians' holiday euros has only decreased by 3 per cent when weighted based on the popularity of the destination, while it has fallen by an average of 8 per cent in overseas destinations.
However, compared to the spring of 2009 the holiday euro is considerably weaker in some of Austrians' top holiday destinations. "Among the top 10 holiday destinations for Austrians, the holiday euro has seen particularly large declines in Turkey (-15 per cent) and Hungary (-22 per cent) compared to a year ago," said Bruckbauer. Although Hungary and Turkey are still the most affordable countries among the top 10 destinations, their lead has narrowed significantly. In fact, the holiday euro will barely be worth more in these two holiday destinations than in Croatia this year. Despite the weakening of the euro in recent months, the holiday euro is still worth more in the US and the United Kingdom than in Austria. However, the holiday euro continues to be worth about the same in Italy and Germany as in Austria.
There are virtually no countries in which the value of the holiday euro has increased. Ireland is the only country offering falling prices compared to a year ago, but the holiday euro is still worth considerably less in Ireland than in Austria. The value of the holiday euro is slightly higher in Hong Kong and China as well, but only by about 3 per cent compared to last year.
In many far-off destinations, the value of the holiday euro has fallen drastically compared to a year ago: A particularly dramatic example of this is the host of this year's Football World Cup, South Africa, where the value of the holiday euro has declined by about 37 per cent. This can be attributed to the significant appreciation of the country's currency on the one hand, and persistent, very high inflation on the other. However, the value of the holiday euro has also fallen by 30 per cent or more in New Zealand and Australia compared to the spring of 2009, and has suffered considerable losses in South and Central America, especially in Brazil. The decline of the holiday euro has been slightly less severe in Asia.
In conclusion, the economists at Bank Austria 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). 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, the changes in value rather than the values themselves are listed for holiday destinations. 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.
Enquiries: Bank Austria Economics and Market Analysis
Stefan Bruckbauer, Tel.: +43 (0) 50505 - 41951