Where Your Travel Dollar Will Go Furthest in 2012

Editor’s Note: This study has been updated for 2013.

Click here to go to Where Your Travel Dollar Will Go Furthest in 2013

photo: Jim Ferri

By Jim Ferri

Those who remember “Europe on $5 a Day” know those days have been gone for a long, long time. But that doesn’t mean you have to sit at home this year, since travel bargains can be found. Today you can still have a good vacation without breaking the bank.

To find the cheapest places to travel in 2012, we’ve brought together several resources to get a good picture of  where you’ll have the best options for stretching your travel dollar.

First we’ve examined historical exchange rates from February 2011 to February 2012 based on data from the ONANDA Corporation, a foreign-exchange trading firm in Toronto. This provides a good sense as to where the dollar is gaining in strength, giving you a better exchange rate.

But only following exchange rates can be misleading – although the rate may be favorable, the local cost of living can be astronomical – we factored in two other indexes to get a clearer view of where the best values are.

The first index is the Backpacker Index for 2012, an online index, now in its second year, which rates 116 cities around the world on their affordability. True, you may not be a backpacker but the index is a great source of info on similar prices in many destinations. A “three-star index” for non-backpackers was published last year, which was similar to the Backpacker Index, but it has not yet been done of 2012.

Lastly, we melded this data with “The Big Mac index” published by the Economist. The basis for this index is purchasing-power parity, letting the Big Mac be the item that represents a basket of services and goods in different countries worldwide, with the exchange rate being the equalizer. The price of burgers are compared worldwide except in India, where editors used the Maharaja Mac, which is made of chicken, not beef, since Big Macs aren’t sold in that country.

If you’re heading off to Europe, you’ll find that things may be slightly cheaper than last year since the dollar has gained about 4% in value over the Euro. But there are a few standouts. In Hungary, Poland and Turkey, for example, the dollar is up about 10%. Backpacker ranks Eastern European cities as the top ten choices in terms of cost, with Istanbul following as #11.

On the other end of the European economic spectrum, the expensive end, are Zurich, Oslo, Stockholm, Venice and Brugges, Belgium, in that order. Switzerland, Norway and Sweden are also the most expensive countries in the world to buy a Big Mac.

If you’re heading south of the Rio Grande, Mexico continues to be a good bargain, since the dollar has gained about 6% in value vs. the peso in the past year (in December it was up an incredible 18% at one point). Overall, Backpacker sees some of the best worldwide travel bargains in South and Central America. There are some caveats here, however: although the dollar has strengthened against the Argentine peso more than 10% in the past 12 months, prices in Buenos Aires continue to creep upward eradicating some of the additional value that has resulted. (The Big Mac index places Argentina as the seventh most expensive city worldwide.) And then there’s the cost of just getting there.

Elsewhere, there are two other countries that potentially provide good bang for your travel buck this year. The first is South Africa, where the dollar has increased 7% in value over the Rand, although the cost of getting there may still be a deterrent for many. But once you get there your Big Mac will be about 64% cheaper than in Switzerland or Scandinavia.

And in Pacific/Asia, India could be a big bargain destination in 2012. Not only is it in the coveted last place of the Big Mac index, the dollar has gained 9% in value against the Rupee since February 2011.

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