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We are constantly looking for affordable offers to travel. Sometimes it turns out to be cheaper to just pay a little bit more for the airfare and save money on for example food or accommodation. A 3 weeks backpack trip to China, for example, turned out to be way cheaper then a three week trip through Spain, although the airfare to China was more then twice the trip to Spain.

How can I find out out that it might be worth just paying a bit more on airfares and save on the rest?

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There are different ways to compare price levels between countries. The Consumer Price Index as e.g. repoerted by numbeo.com (which, in this form, is actually more a purchasing power parity index; see @MarcelC.'s answer) can be pretty good:

Consumer Price Excl. Rent Index (CPI) is relative indicator of consumer goods price, including groceries, restaurants, transportation and utilities. CPI Index doesn't include accomodation expenses such as rent or mortgage. If city has CPI index of 120, it means Numbeo estimates it is 20% more expensive than New York (excluding rent).

The only thing that a typical traveller won't need are utilities (have a look at the list of goods they included, you'll be interested in the items that have >0 in the first column), though if utility cost is high, hotel costs are likely to be high as well. There's also a specific restaurant index on the site linked above.

There's one caveat, though: If there is very little domestic tourism in a country, the costs of "touristy" goods and activities will most likely be de-coupled from the cost of everyday living, i.e. you'r going to pay more than you'd expect).

The inverse (i.e. you pay less than you'd expect) can happen after bad publicity - shortly after a terrorist attack or a natural disaster, prices are usually very low, since there will be many tourists who cancel their plans.

In addition to such a generalized index, you may also want to sample specific comparable goods, for example the cost for a night at an international chain hotel, or the cost of a Big Mac, if you're into that kind of thing.

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@MarcelC: The CPI allows you to compare different places. So when the question is: What is more expensive, Spain or China?, the CPI shows you that prices in China are lower. –  Jonas Feb 16 '13 at 15:53
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@MarcelC: Furthermore, you can compare price levels to where you live, and thus get an idea for costs. Absolute cost of travel cannot really be estimated, because that depends very much on what you want to spend money for. –  Jonas Feb 16 '13 at 16:01
    
@MarcelC.: I'm happy to learn what the CPI really means; in the meantime here's what the website I linked in the OP has to say about their methodology. Their data may not reflect e.g. purchase parity, and thus not be very useful for econometric purposes, but they do indicate how much comparable goods cost in different countries, and are thus useful for travellers. –  Jonas Feb 16 '13 at 19:26
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@MarcelC. so far the CPI prediction is in par with my experiences –  andra Feb 16 '13 at 19:30
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@MarcelC.: It is the website that calls it CPI, and I didn't think it was that necessary to discuss the definitions, since in the end, both CPI and PPP compare baskets of goods and services - just used in different contexts. For non-economists, i.e. a majority of travellers, the distinction is not particularly relevant. At least now I link to your answer, where these issues are discussed more in-depth. –  Jonas Feb 17 '13 at 1:14
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This is an interesting and relevant question. Unfortunately, there is no simple answer at all! There are two possibilities, the Purchasing Power Parities (PPP) and the so-called Big-Mac Index. None of them is perfect. There are caveats (see below). However, if you combine the information from these two and you add some destination specific data, you will come close to your gaol. By the way, this leads to another remark. The definitive answer to this question is destination specific.

First of all, one can use Purchasing Power Parities (PPP). According to Eurostat, the PPP is defined as follows:

Purchasing power parities, abbreviated as PPPs, are indicators of price level differences across countries. PPPs tell us how many currency units a given quantity of goods and services costs in different countries.

SOURCE

From a practical point of view, this means that if two countries have the same PPP, price levels in both countries are the same (on average). A higher (lower) PPP means higher (lower) prices. Eurostat and the OECD publish data on PPP's. The World Bank aims to provide this kind of data for a larger number of countries.

PPP's have some caveats that you should be aware of:

  • They are based on some typical or average consumption patterns or baskets. The consumption pattern of a tourist is different.
  • These indicators are available for enitre countries. However, within countries, there may be huge differences of price levels.
  • Pay attention to the source of the data. Eurostat data is usually well harmonised. OECD also, but to a lesser extent. With the World Bank you have to be more cautious, although they are doing a great job. The larger the coverage, the more careful you should be ...

The Big Mac Index is an interesting indicator too. It is easy to understand. However, the caveat is that it only reflect the price of one single good. On the other hand, it can give you a good indication of average price levels in a country. Oh, and yet another caveat, and it has been invented by The Economist ... ;-)

Consumer Price Indices (CPI) are used to measure measure the evolutions of prices over time, a.k.a inflation:

The consumer price index, abbreviated as CPI, measures the change over time in the prices of consumer goods and services acquired, used or paid for by households.

SOURCE

Even if they are harmonised and comparable, they do not tell you anything about differences in levels between countries.

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If there is something unclear in my answer, please let me know! –  PERSONA NON GRATA Feb 17 '13 at 0:15
    
Although interesting, it is more a lecture on economics then an answer to the question. If you would provide a map similar to Jonas answer I can upvote it, for now I consider it more a comment then an answer. –  andra Feb 17 '13 at 8:36
    
This is not an economics lecture (I am not qualified for that), but a correct answer to your question. In your question you have not explicitly asked for a map. You are talking about comparing one country to another. I will see if I find some relevant maps. But probably not tonight. –  PERSONA NON GRATA Feb 17 '13 at 18:30
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+1 I learned something new. –  MeNoTalk Feb 17 '13 at 18:40
    
I'm a big fan of the Big Mac index, although I use my own Starbucks index. Was a huge surprise for me when I saw the prices in Moscow were roughly equivalent to Vienna :/ –  Mark Mayo Feb 17 '13 at 20:28
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