Portugal now tops a 10-country list as the cheapest place for a holiday. And in neighbouring Spain prices are at a record three-year low.
The survey is based on the cost of eight typical holiday staples such as suncream and coffee.
In Portugal’s Algarve resorts these cost just £32.84, including dinner for two with wine, according to the fifth annual Holiday Money Report by Post Office Travel Money.
Second at £36.68 are Spain’s Costa resorts. Hotels, cafes and restaurants have slashed prices to their lowest in three years to win back UK tourists – resulting in a 48 per cent drop in costs compared with 2007.
The most expensive of the 10 countries is Malaysia at £47.68.
The figures also show that British holidaymakers now get better exchange rates for Hungary, Croatia, Bulgaria and the eurozone.
Post Office Travel Money boss, Sarah Munro, said: “Over the past two years popular resorts in the Algarve and the Costas suffered badly from a drop in UK visitors, put off by the prospect of higher costs because of the weak pound.
“Restaurants and bars responded by slashing prices in a battle for business and competition between the two, together with an improving exchange rate, has resulted in a price crash in Portugal and Spain.” Costs in Turkey have also fallen by 20 per cent, with Turkish lira the third most asked for currency at the post office after the euro and US dollar.
Mexico is the most popular holiday hotspot, with sales of the peso rocketing by 140 per cent.
Ms Munro added: “The combination of competitively-priced packages and low costs on the ground for meals and drinks make Mexican resorts a best buy at the moment.”
Meanwhile, a separate survey shows Britons will cut their holiday spending by 20 per cent this year. Last year we forked out £1,014 each on our main holiday, but this has dropped to £829 for 2011. And 11 per cent say they will not be going away this year.
Bob Atkinson, travel expert from travelsupermarket.com warns: “Pre-holiday research is the key to see what good deals are out there.”
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