How a weakening US dollar could make holidays elsewhere more affordable ...Middle East

Since the most recent administration took office in the White House, tourism to the United States has started to slow.

According to preliminary figures from the US National Travel and Tourism Office, overseas visits to the nation were down by 11.6 per cent in March 2025 compared with the same month the previous year.

Strict and sometimes hostile border controls could be behind the slump, with cases of some Esta-cleared tourists from Europe being refused entry to the US for a variety of reasons.

In recent years, the US has also been an expensive destination for tourists, thanks to a strong dollar. It has not been unusual to find a cup of coffee costing $7 (£5.30) in cities such as New York. However, analysts believe the US currency’s value is on the cusp of weakening to levels not seen for years.

According to the Bank of America’s recent Global Fund Manager Survey, 61 per cent of experts surveyed said they anticipate a decline in the dollar’s value over the next year. That’s the most pessimistic outlook in nearly two decades, thanks in part to Donald Trump’s seemingly erratic approach to the economy and tariffs.

“Recent developments should make a noticeable difference for visitors to the US. The pound is now 10.5 per cent stronger against the dollar when compared to the early January low [when Sterling fell to its lowest rate since November 2023] giving holidaymakers much more bang for their buck,” Dr Nick Rees, head of macro research for UK-based foreign exchange company Monex Europe, told The i Paper.

“Moreover, this may well be compounded by reduced tourism flows to the US, a dynamic that should weigh on demand for hotels and air travel,” Dr Rees added.

While US inflation rose by 3.5 per cent over the 12 months to March, thanks in part to dining out costing more, and figures from American Express Global Business Travel suggesting that the average cost of a hotel room in New York City will increase by almost 5 per cent during 2025, it’s likely that, by December, prices across the board will be lower.

This will make holidays in the US cheaper, but with the political climate putting some visitors off, there are other countries – whose currencies are pegged to the US dollar, even if it is not used as their main legal tender – worth considering thanks to the US dollar’s instability.

“Savvy travellers can use the declining value of the dollar to their advantage and maximise holiday budgets,” James Lynn, co-founder of travel debit card company Currensea, says.

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He cites destinations in the Middle East, including the United Arab Emirates and Jordan, which have currencies directly linked to dollar.

“[These destinations] will suddenly offer much greater value,” Mr Lynn says, “It’s likely that the region will see an influx of UK holidaymakers over the next few months if the dollar experiences a major dip.”

Further afield, the Vietnamese dong is linked by a crawling peg – the point on a scale of exchange rates in which a currency’s value is allowed to go up or down frequently by small amounts within overall limits – to the US dollar.

That currency weakened to a record low per dollar earlier this month, in a country that already offers exceptional value for pound-wielding visitors.

The central banks of many Caribbean countries, including Barbados and Jamaica, are also pegged to the dollar.

Currencies pegged to the dollar could be affected by its instability 

Countries choose to link their money to a traditionally stronger currency to safeguard their exports and competitiveness in the global markets.

In Caribbean nations whose main source of income is derived from tourism paid in dollars, this is particularly critical.

While a weaker pegged currency is bad for those in the import and export trades, it tends to be positive for tourists, as products usually become cheaper to purchase.

“For currencies with explicit dollar pegs, the passthrough should be immediate, seeing these track the dollar lower on a one-for-one basis,” Dr Rees explains.

“This is a little less clear for currencies that have a ‘soft’ dollar peg. Where this is true, central banks may look to smooth the rate of depreciation to ensure that their own currency does not decrease too fast against other currencies, even if this means rising against the dollar short-term.”

“Soft peg” currencies, which include the Venezuelan bolivar and the Hong Kong dollar, tends to be applied to a country’s reserve currency and can be modified over time, usually depending on international inflation rates.

Whether it’s down to a hostile political climate or economic uncertainty in the US, Currensea data suggests that a significant number of UK travellers is looking for holidays elsewhere.

The company’s figures show that the proportion of its members’ spending in the US has dropped by 10 per cent during the first three months of 2025 compared to the same period in the previous year.

Instead, more UK holidaymakers are heading to destinations including Spain, Greece, Italy and Thailand, where value for money and a warm welcome are all but guaranteed.

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