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By Mark Fairlie
Research published this week has shown that more than 57% of Brits put the cost of their summer holidays on a credit card – with more than a third having to cut back on everyday essentials once they return to the UK.
The survey was conducted by CYBG’s digital banking service B; investigating the spending habits of more than 2,000 holiday goers this year.
Holidays are one of the most expensive purchases people make each year, and with the peak holiday season only days away, the findings from the study suggest British tourists will be approximately £1,175 out of pocket per person whilst abroad; with at least a further £118 being spent on pre-trip purchases like holiday clothes and toiletries.
Credit over Saving
Not only does the research show that the average amount Brits are spending on their holidays has increased, but also that they are turning to alternate methods to fund it.
Almost half of those in the survey revealed they did not save for accommodation costs or spending money beforehand, with 53% of tourists not saving to pay for their flights.
Instead, 57% told B they put the entire price of their holiday on a credit card rather than saving for it traditionally; opting to spread the cost of their vacation over several months when they return home.
Whilst this trend is becoming increasingly popular in the UK, it was found that this could have a significant impact on people’s personal finances; with the ‘spend now, worry later’ mindset causing many problems.
More than a third of those asked said they expect they’ll have to cut back on their everyday spending after they come back from their holiday, with a further tenth of people saying they had no idea when they would be able to repay their debt.
Furthermore, a fifth of holiday borrowers said they were already preparing for overspending on their vacation budget.
Louise Hodges, Head of Consumer Communications at B says,
“Holidays are something people find very hard to give up and that’s understandable… [But] What should be kept in mind, however, is the importance of sticking to a budget and not ignoring the reality of how to pay for that break.”
She went onto to say that the study shows many consumers are already relying on credit to afford their usual household bills due to blowing their budgets whilst on holiday, adding that “there is a risk that all that unwinding on holiday could soon be undone when normal life resumes.”
Family Holiday Prices Soar Post-Brexit
Putting the cost of a holiday abroad on credit is nothing new for those in the UK. Back in 2010, insolvency trade body R3 reported that up to two million people were borrowing up to £1,000 each to fund their summer holidays in total; with the majority taking an average of seven months to pay off their debt.
It was also discovered that Scotland had the highest number of holiday-goers turning to lending; with 12% of respondents saying they would willingly get into debt to go abroad.
Since then, the average cost of holidays abroad has greatly increased. Whilst there are a number of factors affecting these prices, new data from Hotels.com suggests Brexit’s impact on exchange rates could be to blame.“In light of certain turbulent events in 2016 and the fall of the pound to a six-year low, the cost of hotels for Brits naturally increased in 2016,” says Isabelle Pinson of Hotels.com.
Before the referendum, one pound was worth €1.30. At the time of writing, this is now worth just €1.17.
Brits are now paying up to 35% more on their holidays to Europe due to the fall of the pound, according to Hotels.com; with 90% of the firm’s top 100 international destinations now being more expensive to visit.
In 2016, the average price British tourists paid for a hotel at some of the most popular destinations was £100 a night, compared with just £92 the year before.
In Dublin, hotel prices went from £95 per night to £114. In Gran Canaria, the cost of a room has increased £20 in just one year; from £82 to £103 in 2016. Reykjavik in Iceland had the highest price hike of all holiday destinations on Hotels.com, jumping from £96 to £130 per night.
What are Brits Spending their Holiday Money on?
The influx of holiday goers turning to borrowing to fund their trips abroad led the Association of British Travel Agents (ABTA) to research into where this money is really going.
Whilst B’s research suggests Brits spend roughly £1,175 each on their holidays, ABTA says the majority of travellers will spend an average of £532 before they’ve even left the country.
Across the nation, more than £1.8billion went towards new ‘holiday wardrobes’, with a further £1.8billion being spent at duty-free shops at UK airports.
The ABTA also looked into how tourists from the UK prioritise their holiday spending, with 28% stating their top outgoings as dining out and 21% spending the most on alcohol; followed by activities and day trips.
When asked if they could make certain cutbacks to reduce the cost of their holiday overall, whilst 56% of respondents said they could, more than a quarter admitted that they didn’t bother trying to save money whilst on holiday.
“Reducing holiday spend doesn’t mean reducing holiday fun,” says Hodges. “Simple, savvy habits like not getting currency at the airport (as it is invariably more expensive) and making sure your credit card doesn’t charge you on foreign transactions, lead to money-saving with zero impact on the holiday experience.”