Yahoo Finance The death of the cheap European holiday – and the destinations where your money stretches furthest
The era of cheap air travel is over, proclaimed Ryanair boss Michael O’Leary last year. How right he was. A week’s trip abroad to Europe in the summer holidays used to be standard fare for middle-class families.
A seven-night trip to Italy cost £616.68 per person on average last year, according to consumer group Which? This year that same trip would cost £757.53 – an increase of 23pc.
The travel industry was rocked by the pandemic more than any other sector and responded by tempting holiday makers abroad with cheap deals as restrictions began to lift. But now airlines, hoteliers, restaurateurs, and travel agents, who are also feeling the effects of soaring inflation, are clawing back the lost revenue.
“The days of flights for under £100 are long gone,” says travel consultant Lucy Allen. “During the pandemic, travel companies were offering such fantastic deals to get people to book, but those deals aren’t going to be around anymore.”
Seemingly within a year, travel has become prohibitively expensive for many families, whose budgets are already at breaking point from rapidly increasing utility bills and steep mortgage rates. The rise in fuel costs has made flights pricier, sky-high electricity bills have been passed on by accommodation providers, and a weak pound means Britons’ cash no longer goes as far as it once did.
A comparison of average prices for package holidays in six popular destinations found a week’s break has risen by an average of 30pc from last year – to £867 per person – according to Which? The consumer group found Greece and Italy have become the most expensive destinations, with flights up 70pc or more.
Flight prices in Europe have shot up by 58pc when compared to pre-pandemic levels, according to travel comparison site Omio, while bookings have fallen by 50pc.
Expensive flights have pushed holidaymakers to consider travelling by train, where prices have increased by just 3pc since 2019.
“We see inflation is affecting travel in general, but the increase of flight prices has been more significant than ground transportation,” says Omio's Catharina Rijstenbil.
“As ground travel becomes mainstream, pricing will become more attractive.”
‘A perfect storm of spiralling costs’
Roughly 63pc of Britons hope to travel more this year than they did in 2022, according to research by Cofton Holidays, despite the steep rise in travel costs. Meanwhile, Google search data shows searches for “cheap couple holidays” have more than doubled.
For airlines, charging more for tickets has been a way to recoup revenue lost to the pandemic. Lockdown saw many airlines retire aircraft, and supply-side issues with certain engines have meant short-haul jets have been slow to return to runways. Rhys Jones, of frequent flyer website Head for Points, says the reduced capacity has driven up prices, while demand from tourists continued to rise.
“This year is the first fully normal year with no obvious Covid disruption,” he says. “We’re seeing a lot of demand from American tourists wanting to travel to Europe because the dollar is so strong – they see it as a cheap holiday.”
Surging demand has meant airlines and hotels are less inclined to offer discounts. While the cost of living has squeezed household budgets, some middle-class families saved up large pots during the lockdown and are now eager to spend it. “If hotels are selling enough rooms at those prices they don’t need to offer cut prices,” Mr Jones says.
Even budget airlines, known for their bargain prices, no longer need to price quite as aggressively as they might have done due to uncertainty in fuel prices caused by the war in Ukraine, Mr Jones explains. “Even Ryanair doesn’t need to price that low anymore. People are willing to pay.”
In March, Ryanair boss Michael O'Leary said airfares could rise by as much as 15pc, following his comments last summer that the era of the €10 ticket was over.
There's no doubt that at the lower end of the marketplace, our really cheap promotional fares – the one euro fares, the €0.99 fares, even the €9.99 fares – I think you will not see those fares for the next number of years,” he told the Today Programme.
Hugh Aitken, of comparison site Skyscanner, says plane tickets are priced by demand, adding that there are still “incredible deals for people who shop around”.
“One common practice of airlines is to have fare classes, and as one fare class fills up, they open the next one for purchase," he says.
“This is one of the reasons why ticket prices fluctuate, and why booking at certain times – for example, at the last minute – may be more expensive as there is usually less supply to meet demand.”
Accommodation costs have also shot up as hotels make up for business lost to the pandemic, while staving off the effects of inflation. A recent study by the Post Office found that hotel stays have increased in 27 out of 35 cities. Only two cities – Lisbon and Vienna – saw increases of less than 20pc.
Car hire has also become far more expensive, with fees up 72pc more compared to pre-pandemic years, costing the average driver £100 in extra charges. Data from car rental broker Zest Car Rental shows seven out of nine popular holiday destinations saw rice increases of more than £100.
Rates soared in 2022 as widespread vehicle shortages hammered the industry, but prices have not dropped as much as expected despite companies having time to restock their fleets.
In Cyprus, the average daily rental rate more than doubled compared to 2019. An investigation by Which? found a seven-day rental in Cyprus would set holidaymakers back £248, up 112pc on pre-pandemic rates. Portugal and Greece also saw substantial increases, with prices rising by 99pc and 97pc respectively.
Nonetheless, Britons are “fed up” with the longer-than-expected cold weather so far this year and are eager for a sunshine break, says Ms Allen. “But holidaymakers will have to be realistic now about what they can afford, as everyone has less disposable income now,” she adds.
Ms Allen, of Not Just Travel consultancy, says families have been cutting back on their holiday budgets as a result of increased cost of living pressures. “Where they used to go for Corfu for 14 days, now they go for nine or 10,” she says. “In some cases, they’re prepared to drop the standard of the hotel, such as one with fewer facilities or not as prime a location.”
But even with cost-cutting measures, she says those used to paying “three-star prices for five-star hotels” will have to make difficult decisions to afford to travel this year.
‘A holiday abroad is now totally beyond my budget’
Katie Roberton, from Bournemouth, has not been abroad since last year when her parents paid for a week in the south of France. Without their help, she says, it would have been beyond her means.
Ms Roberton, 50, is a single parent and runs a business selling custom ceramics. But expensive plane tickets and high accommodation costs mean a holiday abroad is simply unaffordable for her this year.
“I want to show my 11-year-old amazing places, but it’s just beyond my budget right now,” she says. “We’ve got an airport here in Bournemouth but looking at prices you can see flights are twice as expensive as they were pre-pandemic. There are so many nice destinations from Bournemouth but £350 each is just too much.”
Ms Roberton found that renting a nearby beach hut for £450 would be a more affordable option than flying abroad. She adds: “It’s not the best idea but it’s a bit more like going on holiday, or at least I’m trying to convince myself of that.”
The places in Europe where your money goes the furthest
After a turbulent economic year exacerbated in part by former Prime Minister Liz Truss’s ill-fated mini-Budget, the pound’s value against the euro has slumped.
Sterling rose in value against only five currencies since last year, according to the Post Office’s annual holiday index. Despite this, there are a few choice destinations where a weak pound will still go the distance abroad, thanks to low local prices.
Portugal
Lisbon in Portugal was named the best value European city in the Post Office’s annual costs barometer. Prices in the capital were up just 2pc from last year – a far smaller increase than the 35 cities included in the report. Accommodation costs rose by 5.2pc, while others surveyed had soared by as much as 50pc or more.
The report found the average price of a three-course meal and a bottle of house wine in Lisbon is just £39.01, which is less than any other city in the survey.
Tourist attractions are also made far more economical by the Lisboa Card, which costs from €20.90 per person per day (€14.25 for children) and provides free access to 35 museums and places of interest, free transport on the metro, trams, funiculars and trains to the fairytale town of Sintra and the beaches of Cascais, plus discounts on a variety of local services and stores.
Mainland Spain
While the pound’s poor showing against the euro in recent months might be off-putting, low prices in parts of Spain still make it a great value destination. Cheap holiday expert Chelsea Dickenson said the villages near the Andalusian hills were particularly good value.
“If you need to keep costs down, my advice would be to think mainland over island, inland instead of coastal and city over countryside,” she says. “However, if you are desperate to find an island getaway that ticks all the boxes of that summer retreat, an all-inclusive deal is a fantastic way to keep on budget.
“You can stay 5 nights at Protur Floriana Resort, flying from East Midlands for just £323 per person,” she says.
Albania
Albania’s shoreline has been doing the rounds on TikTok and Instagram, and is believed by some to be the “Maldives of Europe”. The current exchange rate is £1 to 129.49 Albanian Lek, and a meal for two in a mid-range restaurant costs roughly £25.
Low costs of car hire and accommodation also make Albania a cheap if rarely considered holiday destination.
“I found 10 days’ car hire from Tirana in June for just £251,” Dickenson says. “I priced up a two-week road trip in May and found that I could get my flights, accommodation and car hire for easily under £600 per person.”
