Sterling’s slow climb back to strength against most holiday currencies means the forecast is looking much brighter for UK tourists planning trips abroad this year, according to the eighth Post Office Travel Money Holiday Money Report.

Prices are down in 70% of the 44 destinations surveyed by the Post Office for the annual report’s Worldwide Holiday Costs Barometer with the biggest falls of 30-32% in Jamaica, Japan and the Gambia. Bali emerges as best value overall while Portugal’s Algarve is cheapest in Europe.

Resort prices in Portugal and Spain provide the report’s most unexpected story. Even though sterling is still weaker year-on-year against the euro (-1.9%), prices have plummeted 18% in the Algarve. As a result, Portugal emerges as Europe’s cheapest destination for the first time since 2010 and its barometer total of just over £35 suggests Portugal’s most popular resort area means strong business in the year ahead.

Conversely, Spain is the only euro zone country surveyed to register a significant price rise. A 22% increase in meal costs on the Costa del Sol accounts for the overall rise in the price of eight typical tourist items to around £39, which means that Spain falls from joint first place in last year’s Costs Barometer to sixth position.

However, Spain is in the minority as the report says that cheaper tourist meals account for the lower prices it found in most destinations. Boosted by a sterling surge that will give UK visitors extra money to spend in more than three-quarters of the most popular holiday destinations, the report found that eating out costs less now than a year ago in 30 of the resorts or cities surveyed.

These include Bali, which has toppled both Sri Lanka and Spain from the top spot they shared a year ago. At around £31 for the barometer items, including an evening meal with drinks, Bali’s prices are more than a third cheaper than in Sri Lanka, which has fallen to 15th place after registering the barometer’s highest price rise of 38%. A slump in the value of the Indonesian rupiah makes tourist costs 19% cheaper in Bali now than a year ago.   

In the euro zone Portugal is not the only destination surveyed where prices for UK tourists will be lower. Resorts in Cyprus (Paphos), Greece (Corfu) and Italy (Sorrento) are also cheaper, although Italy remains most expensive in the eurozone – and in Europe overall - with a barometer basket costing around £81, more than twice as much as either Spain or Portugal.

In its forecast of likely trends for 2014, Post Office Travel Money tips Burma, Qatar and the Philippines as emerging destinations to watch
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