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Portugal’s Algarve has been named the best-value holiday destination for British tourists for the first time in nine years, according to new analysis, due to its cheap meals and sterling’s strength against the euro.
The cost of a basket of eight common tourist purchases — including drinks, a meal for two and sunscreen — has dropped 1.6 per cent year-on-year to £58.95 in the Algarve, making it the cheapest of 47 destinations surveyed by Post Office Travel Money, moving up from fifth place in 2024.
Cape Town in South Africa (£59.84) and Tokyo in Japan (£63.34) claim second and third places, despite price increases in both cities compared with a year ago.
A three-course meal for two with wine in Portugal’s popular Algarve costs £40.33, a third of the price of the same meal in New York (£128.27), the most expensive of the destinations surveyed.
“Even though the Algarve has featured in the best-value top 10 since 2010, it has struggled to match the cheapest long-haul destinations on price in recent years,” said Laura Plunkett, head of Post Office Travel Money.
“Now prices have risen in its closest competitors, but remained low in Portugal.”
A sterling surge of 21.1 per cent against the Mexican peso and 17.5 per cent against the Turkish lira has translated into sizeable savings for UK holidaymakers in these countries, the foreign exchange provider said. Those exchanging £500 for pesos will get £87 more than a year ago, making destinations such as Cancún and Tulum much better value. The lira’s continued depreciation means British visitors would receive £74 more per £500 exchanged.
This week the pound and euro rose against the dollar to their highest level since the week of the US election, as President Donald Trump, announced an additional 25 per cent tariff on steel and aluminium imports from Canada and US trade policy uncertainties rattled investors.
The pound and the euro rose against the dollar to their highest level since the week of the US election on Wednesday and sterling ended the week at about $1.29, its strongest rate since November 8 2024.
“This obviously spells good news for holidaymakers as they will have more dollars for their pounds when they change money compared with earlier this year,” said Plunkett.
“However, it is hard to predict how things will play out in the coming weeks.”
The Post Office’s 19th annual report found that three in five Britons plan holidays abroad this year, up from 51 per cent last year. By the time it conducted the survey in January 2025, some 44 per cent had already booked them.
Plunkett noted a “real resilience” in attitudes to getaways, with consumers prioritising trips abroad over other spending choices.
“We think it is part of a lifestyle that people have become accustomed to and don’t want to relinquish,” she said.
More than half of those planning a holiday abroad this year either intend to budget more or the same as they have done in the past, even as the cost of living crisis weighs on spending. The proportion of people opting for an activity holiday has tripled to 15 per cent, compared with last year’s figures.
The highest year-on-year price rises were in Kenya’s Mombasa, Turkey’s Marmaris and Egypt’s Sharm el-Sheikh, while the biggest faller was the Dominican Republic.
