Save the pound! Take a break beyond the eurozone

For spending power, go east or north this summer. But beware, other currencies are strengthening, too, says Mark Rowe

Holidays in Western Europe will be at their most expensive for years this summer, a consequence of the euro stealthily building up its muscles. Last week the pound was trading at around €1.24, making each euro worth around 80p, an increase of 17 per cent on a year ago. If you haven't already booked a summer break, especially for the whole family, it may be worth looking beyond those favourite playgrounds of Spain, France and Italy to European countries outside the eurozone, or ones that have not yet joined the European Union.

Generally speaking, the further east you head in Europe, the cheaper the cost of living and, traditionally, the cheaper the price of a holiday. No surprise, then, that many tour operators are reporting a rise in bookings in Eastern Europe. According to the Post Office, dinner for two, in Turkey, including wine, costs £30.14 compared with £42.05 in Italy.

However, before heading east, it is worth noting that the euro has a long reach. Several currencies, including the Bulgarian lev and the Croatian kuna, are pegged to the euro. Meanwhile, local tour operators in Bosnia, Croatia, Montenegro, Lithuania, Latvia and Estonia now price the packages they sell to British operators in euros, as do many hotels. Slovenia is the only official Eastern European member of the eurozone, and Montenegro, despite disapproval from Brussels, has unilaterally adopted the euro as its national currency.

According to the Post Office, the Czech koruna is now worth 31.63 per cent more against sterling than a year ago. The Croatian kuna is 22.98 per cent stronger against sterling, the Polish zloty is 29.03 per cent stronger, and the Hungarian forint has risen by 13.28 per cent against the pound.

But while costs for those holding British pounds rise with the strength of the euro, this frequently remains relative, according to Andrea Godfrey, general manager at Regent Holidays. "A holiday in Bulgaria or Montenegro is still going to be cheaper than the equivalent in France or Italy. Coffee and wine and the general cost of eating out are still lower," she says.

Helen Warburton, head of travel at the Post Office, agrees that fluctuations in currency markets are not the only factor, adding: "We recommend they consider not just the exchange rates available but also the living costs in holiday destinations."

The regional specialist Balkan Holidays has experienced an increase in bookings. "Our sales are up for the summer of 2008," says Chris Rand, its marketing manager. Destinations include the Black Sea resorts of Slanchev Bryag and Zlatni Pyasatsi. "One of the reasons for this is that people are looking outside the eurozone." Bulgaria is the most popular destination, according to Mr Rand. "Bulgaria has 230 miles of sandy beaches and some very good resorts for the family. There are waterparks and excursions to local villages."

Montenegro, reached by direct flights and from Dubrovnik in Croatia, just 12 miles away, has seen the number of British tourists leap from 1,045 in 2000 to 13,000 in 2007. It is easy to see why: summer temperatures average 30C, while the mountains are a pleasant 21C. The country has four national parks, with a fifth being planned, and almost 180 miles of coastline. Durmitor National Park contains the river Tara, a Unesco reserve and the largest European supply of drinking water, and is heavily promoting rafting and kayaking. Costs, thanks to the euro, though, are high: anecdotal reports suggest that a good meal for two with wine works out at around £48.

Turkey is also being booked by holidaymakers who see it as a cheaper alternative. A seven-day package for a family of four in the mountain village of Islamlar stars at £2,250, including flights, with Exclusive Escapes. The company also offers four nights' b&b for four people in the centre of Istanbul at £2,780, including flights. "Turkey is no longer the 'cheap as chips' destination it was before the lira was revalued in 2005," says Andrew Lee, managing director of Exclusive Escapes. "But for people who go to Tuscany and the top places in France, the equivalent product is available at a lower price in Turkey."

Thomson has also seen interest in Turkey grow, with sales up by 10 per cent for them and 30 per cent at First Choice. Responding to interest in Eastern Europe, Thomson has for the first time launched a package deal to the Romanian region of Transylvania. Prices per person start at £549, including scheduled flights from Heathrow and seven nights' half-board. A spokesman said that holidays to Poland and Slovenia were also "selling well".

But you can head north as well as east. According to the Post Office, Scandinavian currencies are also selling strongly. Sales of Swedish krona rose by 13 per cent in the year to March 2008. "You can have a perfectly affordable holiday in Sweden or Denmark," said Claire Ladsky of Scantours. "The notion of these countries as too expensive has been a myth for too long." Scantours offers a package of £1,900 for a family of four, including flights, car hire and seven nights' b&b in Denmark, where superb beaches are found on Zealand.

While the continental holiday may be more expensive, how consumers will react is uncertain. Despite the strength of the euro, the Post Office reported euro sales up by 29 per cent in Easter week compared with 2007. "There is no doubt that the strength of the euro is being felt in the middle and mass market," said Mr Lee. "You see it very clearly. But you need to remember that people still travel to the United States when the pound is weak against the dollar; it's just that more of them do so when the pound is strong. The same principle is at work with the euro."