Worried about the collapse in the value of the pound? Thinking of putting off your holiday plans? My advice is don’t. Get out there and book now.
While, it’s certainly true that you will be paying a little more for your holiday than you might have hoped, you are likely to get much better value by acting soon rather than waiting to see what happens to the exchange rate in the hope that it will improve.
What’s the logic behind this? Since the Brexit vote, the pound has has dropped in value by roughly 20 per cent against the dollar, and a little less against the Euro. The market stabilised a litte this week, however, it is difficult to see anyone rushing to buy pounds for some time to come. Investors like certainty, and we sacrificed that luxury on June 23. So, unless something unexpected happens to destabilise the Euro or the US dollar, sterling is likely to remain weak for a couple of years - at the very least.
urrencies that have strengthened the most against the pound
Airlines and tour operators hedge against currency fluctuations, so the full impact of the pound's slump hasn't yet hit
The silver lining to all this however, is that not all these price rises will hit us immediately. Airlines and tour operators know that they are vulnerable to sudden collapses in the value of the pound and as a result, they hedge against it. In other words, they guarantee the exchange rate that they are going to have to pay in advance. The same process can be used to protect against rising oil prices too.
As long as they don’t try to profit unfairly from the situation, what protects them should protect us too. Of course, if the pound strengthens unexpectedly, they - and we - lose out. But in this case few people were predicting a Brexit vote, so any tour operator or airline which did buy currency in advance before June, is certain to have obtained it at a much much better rate than we are facing now.
So this season’s winter sun, ski packages, and even some of next year’s summer offerings were priced when the pound was buying over 1.30 euros, rather than today’s rate of 1.10. And options on aviation fuel are often bought more than a year in advance. In short, by buying your flight or a package holiday now you can do much to offset the fall in sterling.
Consider an all-inclusive holiday - it could offer the best value CREDIT: ALEKSANDAR TODOROVIC - FOTOLIA
Where will the best value be? Because you pay for everything in sterling in advance and you won’t even have to pay for food and drink in the local currency, all-inclusive packages - whether for sun and sand or for skiing or other activities - will offer maximum value in the short term. And if you can find a ski package which also offers the chance to book your lift pass and equipment hire in sterling, that is likely to offer good value too. Although do check the Euro price quoted on the resort website to make sure you really are getting a decent deal - many resorts have an early booking discount, for example.
Cruises too are much more likely to rise in price over the coming months. And if you are planning a long-haul flight in the next year or so, you will probably do well to book it sooner rather than later.
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