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Travel industry news

04 Jun 2019

BY Rob Gill

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What uncertain exchange rates mean for summer holidaymakers

In these days of political turmoil, one immediate impact for both agents and their clients can be exchange rates – particularly the value of the pound when measured against key currencies such as the euro and US dollar.

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What uncertain exchange rates mean for summer holidaymakers

While the pound has been in the doldrums against both the euro and dollar since the EU referendum in June 2016, sterling had been slowly gaining in value against the euro for the first few months of 2019, despite the seemingly endless Brexit crisis.


The pound reached the giddy heights of 1.18 euros in early May, its highest level for about two years. But within three weeks, it was back down to a rate of 1.13 euros to the pound as worries about a no-deal Brexit and the US-China trade war took their toll.


As for the US dollar, the pound was trading at about 1.32 to the dollar in early May before sliding to 1.26 dollars by 29 May – the lowest exchange rate since January 2019. By comparison, the pound has gone up by about 26% against the Turkish lira over the past 12 months.


With a new Conservative leader and prime minister due to be elected later this summer, there could be more turmoil ahead for currency, especially with several candidates declaring their willingness to forge ahead with a no-deal Brexit.

Number cruncher

Top factors affecting consumers’ holiday choices:

81%

flight costs


77%

in-resort costs


64%

package prices


55%

value of the pound

Gino Ravaioli, chairman of the Dynamic Currency Conversion Forum, said: “The pound’s volatility is likely to mean uncertainty and confusion when it comes to holiday spending this summer.


“If the weak pound does push British holidaymakers to venture further afield to non-eurozone countries – such as Turkey, Tunisia or Bulgaria – many may opt to pay by card rather than exchanging cash before they jet off.”


Nick Boden, head of Post Office Travel Money, added the “pound still packs a punch” in some short-haul destinations. “In Europe, sterling is performing best against currencies for Turkey, Sweden and Hungary, so a city break in Stockholm or Budapest or a beach break in Marmaris will give you more cash in your pocket than in other destinations,” he said.

 

Peter Lilly, business development manager of foreign exchange specialist AFEX, added that rates of European currencies against the pound were actually “comparable” with previous summers since the 2016 EU referendum.

“The cost of travel money to holidaymakers shouldn’t be much higher than in previous years,” he said. “Yet, if the public perceive that the pound is weak, then we could see an impact.

“For instance, we have witnessed on a couple of occasions where foreign exchange rates for travel money have caught the headlines – normally when sub-parity exchange rates for euros have been offered in airports.”

Despite the pound’s instability, many holidaymakers still leave it until the last minute to obtain their foreign currency. Specialist forex firm Caxton found 25% of people purchased holiday money only days before departure.


Alana Parsons, Caxton’s chief operating officer, said: “Getting the most value for your travel money can be tricky, but not if we spend as much time planning our finances as we do researching our holiday destinations.”


Parsons added consumers could “build up a travel money fund” and then “lock in” an exchange rate for their next trip on a currency card to mitigate any sharp fluctuations in the pound’s value before they travel.

Key rates against the pound

Euros

€1.13

Euro

US dollar

$1.26

US dollar

Turkish lira

7.42

Turkish lira

13% – increase in sales of Turkish lira this summer

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