Beat the Brexit blues – in the sunny Canary Isles
THE pound has plummeted since the Brexit vote in June. Compared with a year ago, sterling has lost about 20 per cent of its value against the euro and 18 per cent against the US dollar.
Sterling rallied a little last week, due to Bank of England forecasts and the High Court’s ruling that the process to leave the EU can be initiated only by a vote in Parliament. But the current exchange rates – about €1.12 and $1.24 to the pound, but worse for most tourist transactions – are so lousy that it’s tempting to delay booking an overseas holiday.
I’m no financial expert, but it seems very likely we will be stuck with poor rates for the foreseeable future. And if you book now, at least for package holidays you may actually be better off. Major tour operators protect themselves against exchange-rate fluctuations by doing something called hedging – that is, by fixing in advance the rates used for transactions with suppliers such as hotels.
How much companies decide to hedge, and at what rate and how far ahead, varies. But in general, by booking a package now you may well be getting a holiday costed on a more favourable exchange rate.
The travel association Abta claims this is especially true for breaks this winter. I carried out price checks on several packages with Thomson and Thomas Cook to the Canary Islands in early December, and compared the cost of booking the same flights and hotels independently or through an online agent. And yes, the
packages were cheaper – by up 40 per cent.
Importantly, if you opt for an all-inclusive winter-sun package, and thereby pay for pretty much everything upfront, you will be insulating yourself as far as possible from current rates. For next summer, tour operators appear to be less well hedged. But nonetheless, there is still a strong case for booking packages now. By doing so, you will be largely shielding yourself from any prospect of the pound dipping even further against the euro, especially if you go all-inclusive.
Another reason to consider booking overseas travel now is that air fares look likely to rise in the near future. A major cost for airlines is fuel, which is priced in dollars, so the pound’s woes will have an impact at some point.
And if you’re thinking of taking a UK holiday in a peak period next year, there is also a good argument for booking now. Why? To secure the best accommodation. The weak pound will result in more people opting for a staycation, while more foreign tourists will be attracted to the UK, since prices for them are attractive.
Self-catering agencies I’ve spoken to are already seeing marked year-on-year rises in bookings. Cornwall-based Classic Cottages reports a 40 per cent increase, while pitchup.com – a booking service for campsites and caravan parks – says bookings for stays in 2017 are up an incredible 180 per cent. It cites the exchange rate as a big factor.