Understanding the Cost of Destinations

One of the most common reactions I got from my previous post about the total cost of my three years of travel was, “wow, that’s really cheap.”

Throughout my years of travel, I’ve come to learn that the cost of a destination should not simply be defined as “X country costs $X a day.”

Well, that “$X” number might be in the ballpark of what you might end up spending in the end, but the problem is that most people end up spending more than what they budget because they don’t take their time to understand their destination and how costs are structured there.

money from the world

When I did my cost break down in my previous post, I preferred to not give daily averages per country since many of them ranged outside of the norm from what a typical backpacker would spend.

But, even when my daily average was abnormal for some countries, the “cost structure” still followed through according to how the destination prices things.

Also, along my trip, I’ve traveled with several other people who also like to travel on a budget and plan similar trips to mine, yet sometimes they do it much cheaper or much more expensive than mine.

It’s pretty much the same trip, but they have a different approach to how they spend their money in certain places. They either like to pamper or rough it a bit more than I do or look for alternatives that fit best what they are looking for out of the destination.

Still, whether they were more expensive or cheaper than me, their spending followed the same “cost structure” as mine.

What is Cost Structure?

Ok, I’ll explain what Cost Structure is (at least for me). This is a scale that marks the range of money (from cheap to expensive) a traveler is expected to spend on any destination’s major tourism components, including but not limited to accommodation, sightseeing, food, transportation, and such; and how each component relates to the others cost wise.

This helps you understand how to properly fit a destination into your budget by knowing exactly how your money is distributed in each place you visit.

Different destinations approach all living and travel related costs in different ways, which means that each destination deserves its own careful analysis based on your style of travel and interests.

Hiking Routeburn Track in New Zealand

Websites like Budget Your Trip, which I always recommend to see daily cost averages on any given country as a budget, mid-range, or luxury traveler; are only good enough to have a broad idea of general costs, and often fall short from the actual daily average you’ll end up spending.

But, I believe you can approach budgeting in a different way since only knowing a daily average doesn’t mean that you know exactly how you’ll be spending and distributing your money there.

How to understand the cost structure of a country?

I think it’ll be best for me to explain it by showing some samples with actual countries.  But before I go forward, I have to warn you that in order to understand the cost structure of a place, you need to do your proper research on that destination.

I approach cost structure by taking a look at the four major spending aspects of travel: Accommodation, Food, Transportation, and Sightseeing/Entertainment.

Also, while cost structures don’t dictate a specific amount, I’m using as a base a daily average spending between $50 and $60 to consider something to be cheap, moderate, or expensive. (This is a common daily average spending in most of the world for budget backpackers and mid-range travelers. My RTW average is $55 a day.)

We all know that Norway, Maldives, Australia, New Zealand, Singapore, and Japan are all expensive countries. “Geez, you need a high budget for all of them!” that’s what most people say.

But, if you approach your budgeting by considering the cost structure, you’ll see that money is not spent the same way in all of them, so once you understand this, you could save money by making some smart decisions on how you should travel the country to fit into your budget.

Let’s begin with Norway. Uff, one of the most expensive countries out there. How does it fare in the four categories?

NORWAY

Norway

Ok, Norway is quite expensive, no doubt about that, and honestly, Norway is not a country that gives a lot of wiggle room to go cheaper unless you go very local by couchsurfing, buying groceries, traveling slow, and focusing your sightseeing in culture (which is free in some cases).

Here, quite honestly, you have to be prepared to spend a decent amount of money.

But, let’s jump to the Maldives, which is as famous for its overwater bungalows as it is for its “too damn expensive” costs. Well, you might be a bit surprised by this.

MALDIVES

Maldives

The Maldives, once reserved for luxury tourists, has now expanded extensively into the budget travel industry by offering cheap accommodation options. But beyond that, the Maldives has always offered incredibly cheap transportation and food options in its populated islands.

Let me show you a few more expensive destinations…

AUSTRALIA, NEW ZEALAND, EUROZONE

OZ-NZ

Now, how is it that Australia, New Zealand, and the Euro Zone –being expensive countries and region– can be cheap in the entertainment category?

Well, you can find all sorts of prices in the entertainment category, from expensive tours to free sightseeing, but sightseeing these destinations and getting their true essence doesn’t cost much since most of their sights are either free or relatively cheap.

JAPAN, HONG KONG, MACAU

Japan

Just like Australia and New Zealand; Japan, Hong Kong, and Macau show their essence mostly through free or cheaply priced sights.

In addition, these countries also provide you the ease of eating a good meal for a very low price, which is something Australia and New Zealand don’t provide (unless you go to McDonald’s and other fast food chains).

Transportation in Japan, while not the cheapest, is well organized, well connected, and moderately priced for what you get. Accommodation in these places, on the other hand, is a budget killer!

So, in most of these countries I presented above, which are considered “expensive,” you could end up spending roughly the same amount of dollars per day, yet should you allocate your money smartly to match your interest and how the destination structures its costs, you could make a destination much cheaper than usual.

You also have regions like Central Asia and some parts of Northern Africa and West Africa that are well known for not being necessarily cheap, but they are not budget breakers either, but what these regions have in common is that if you plan on moving a lot, you might need to increase your budget.

Places of interest in these regions are either far, remote, or don’t have enough tourism to make them cheap, so there are chances you might be renting your own private transportation.

CENTRAL ASIA, WEST AFRICA

Central-Asia

Now, let’s compare other countries and regions that have a reputation for being moderately priced or cheap.

CHINA, EAST AFRICA, SRI LANKA

China

Oh, China… people say it is a cheap country, but the truth is that if you’re going to sightsee a lot, prepare your budget for it.

Unlike most countries, China charges you for every single sight they have, and they are not cheap about it. They even charge to hike in nature… hiking!!

Regarding East Africa, the cost of food, accommodation, and transportation can be done cheaply (if you want to do it on a small budget), but just like in China, sightseeing and tours are incredibly expensive since places of interest are either remote, had to get, or there’s not enough demand to offer them at lower prices.

SOUTHEAST ASIA, INDIA, EGYPT

Southeast-Asia

Southeast Asia still lives to its fame of being a cheap region, and so do Egypt and India. Most things can be done for cheap, but when it comes to entertainment, you might need to spend some money (not necessarily a lot) to get the most of the destination.

This list can go on and on, but I believe you get the point that destinations have a characteristic approach to pricing in each category and that once you understand their pricing, you will then know how to fit any country into your budget.

Planning a trip based on Cost Structures

Once you know where you’ll go, you need to think of all or most of your actions there; like, taking the bus on a daily basis, the train from the airport, the average hostel/hotel cost under your travel style, the average meal costs, the sights you’d like to see, etc.

Research them and find their costs if they are listed online so you understand how your money is spent.

Once you do your research, you’ll see several countries will have a similar cost structure. These countries can be “bundled” together to create an overall picture (or map) that will help you see how “travel” money is spent in different places around the world.

Now a day, also, the “sharing economy” helps bring down certain costs, especially on accommodation. Sites like Airbnb allow you to book a room, apartment, or villa for a fraction of what a hotel with similar facilities and amenities would cost.

This we can use to our advantage to extend our money’s reach. (With this Airbnb link you get $40 off your first booking)

Similar to the Airbnb there’s Uber and Lyft in the transportation industry and several tour companies that hire locals to run their own private tours at a fraction of what a tour company would charge (these vary per country).

Should you be planning on doing a round the world or long-term trip, this could help you choose destinations in which you’ll be comfortable with your budget, or discover new destinations you didn’t even think you’d be able to afford, like the Maldives, for example.

Maldives

If you have a budget of only $50 a day, for example, you can still travel to China, but you might need to cut on the sightseeing; or you could go to Japan and find slower and cheaper ways to move around; or go to Australia and focus on the free sightseeing that can be found all around the country and try to couchsurf to reduce your spending.

When people ask me how can I travel for so long and afford my trips, this is what I do. I try my best to fit the destination into my budget, and not my budget into the destination.

This requires some sacrifices every now and then and missing some interesting sights, but if it is not a priority or a must, then it is not worth overspending on it.

What do you think, have you thought about the cost structure of the places you visit when planning your trips?


Cover image from Flickr Creative Commons.

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29 thoughts on “Understanding the Cost of Destinations”

  1. Hey Norbert. The most important aspect of travel, as far as I’m concerned, is always accommodation. If you can get cheap lodging, everything else can be adjusted for – you can eat in to cut meal costs, drink at home rather than go to bars…but accommodation is the key.
    We’re been travelling slow the last 5 months and our lowest costs were actually in the Czech Republic. Prague was actually cheaper than Bangkok. Why? First, we got lodging at the ‘local rate’, an apartment at $500/mo (we knew someone there). In Thailand we’ve booked using Airbnb which is not optimal – we’re finding that, for slow travelers, there’s a hole in the 1-2 month market. Guesthouses fine for short term travelers and anyone can rent an apartment for 3-6 months. But 1-2 months you’ll always pay more. The other thing is alcohol – for all the “cheapness” of Thailand, you’ll still pay double for a beer that you’ll pay in Prague.
    Its interesting that tabulating everything our stay in Prague was actually cheaper than it has been to date in Thailand. That may change in coming months – we’re going up north to Nong Khai where we can get a monthly rental in the $300/mo area.
    As slow travelers I wonder if we have it wrong. Instead of going to a place and looking for lodging, maybe we should be looking for lodging options through our friends, connections, or through house sitting sites…and then travelling based on those. We never really had it in mind to go to Prague but we knew someone who had to sublease for 3 months – ended up loving the city and learning to live like a local. Unbeatable experience.
    Frank (bbqboy)

    1. Hey Frank –

      Thanks for your comment and sorry for my late reply. I believe you’re right about accommodation being key to your spending and how there’s a gap on cheap accommodation for 1-2 month stays. While airbnb can help to save money on a better quality accommodation, it will certainly not beat local rental rates.

      I knew Prague was cheap, but didn’t know it could be done that cheap!

      One thing I try to do, if I know that I’ll be spending a long time in one location, is book the first few days on any regular hostel or airbnb, and then try to look for accommodation locally through the newspaper or asking people around. That’s how I managed to find an apartment in Chiang Mai for $68 a month!

  2. As a freelancer, I work so that I have enough in surplus to do whatever I want. It may mean many 15+ hour days to do something very pricey, but the ends justify the means most of the time!

    1. Frank, you’re like me in the sense that if there’s something I really want to do and feel it is worth it, I go for it! I spend on what I value, rather than spend on what people typically spend when they go to a destination.

  3. Yes u r correct..The most important aspect of travel for middle class family is its accomodation…It becomes very important for traveller to think about it.

  4. very good information about the cost of destinations people can read this article and make a good plan about their tour within the budget and thanks for sharing.

    1. Agree, but if people truly understood how their spending breaks down while traveling, they would see that it is not necessarily expensive once you understand how a destination works.

  5. The cost of travelling can vary a lot depending on the age of the travellers. Younger travellers tend to allocate less funds for accommodation and more on entertainment and travel gadgets.
    The priorities for families are also different. So the age bracket is a significant factor that determines the costs on any given holiday.
    Anyway, I really like your article, especially the graphs.
    Good work.

    1. Thanks, HotelsFairy. You’re right about that. The allocation for accommodation tends to vary depending on the age and type of traveler, but in general you can assess if it’s going to be on the upper or lower scale of a typical budget depending on the country you’re visiting.

  6. Very nice travel budget tip! For a parent like me, it’s important to plan ahead specially when I include my family on a holiday trip. I think I can apply your meter diagram to select which places we can go budget wise.

    Thanks for sharing your thoughts Norbert!

    1. Thanks! And definitely, the important part of this is being able to do proper research to understand the destination. Once you’ve done that, you can assess how budget friendly your trip can be.

  7. HI Norbert,

    Very good post, i liked to read it. But i disagree on Norway. Norway is best for Nature and hiking and this is free. I did wild camping this is free and allowed as well. Buying train tickets in advance is reletiveley cheap as well. Getting to Norway with ryanair is cheap again if you live in Europe. And regarding eating, if you cook for yourself it wont be much more expensive than it home. I spent much more money in China, South Africa or even South America than in Norway.

    In my opinion you can always save in accomodation(couchsurfing, campjng etc), food (groceries, street food) and transportation ( hitchhiking, buy tickets in advance), but when it comes to entertainment/sightseeing you dont have an option you pay or you wont see/do it. So for my travelling this is usually the highest costs. Just returned from China, as you mentioned, you really pay for everything and it kills your Budget because of course you wanna see it after you have travelled so far.
    In general many sightseeing/entertainment costs have exploded over the last 10 to 15 years all over the world. Just read what e.g. the Inca Trail, Petra or Disneyland cost compared to 10 years ago…..This is not just inflation….

    1. Hi Joerg – I will have to mostly agree with you about Norway. It is true that most of the good activities are nature related, so they can be done for free, but once you want to do any cultural or entertainment activity there, it is awfully expensive. For example, most museums and cultural sights in Oslo are simply budget killers. Yes, it helps if you buy the “city pass” which gives you access to many of them for a single price, but the city pass is still not that cheap.

      So, if you want to focus on nature, then yes, your stay becomes much cheaper!

      Oh, China… I just can’t handle their overchanging for everything! haha

      And it’s true what you say about the rise of admission prices for entertainment all around the world. It’s an unfortunate trend.

  8. P.S. I am surprised that you say entertainment in Europe is inexpensive. Are you missing all the popular tourist attractions?
    Of course there are musuems for free in London, but have you seen London without the Tower, London Eye, Shakespeare Globe, Westminster Abbey, Buckingham palace…?
    Than watching a soccer match and visiting a concert….

    1. Well, as you know, Europe is priced dynamically all over the continent. All the samples you mentioned here are based in the UK, which by default uses the Pound, which is on itself an expensive currency. The rest of Europe, as expensive as it may be in some countries, still falls slightly cheaper than the UK. World class museums in Berlin, Florence, Rome, Paris, and other cities do charge a decent admission fee, but if you compare many of them, the price is not necessarily outrageous.

      Now, concerts and soccer matches I find slightly irrelevant since prices can be all over the place depending on who’s playing, where, and when in the season. That has nothing to do with the destination itself.

  9. Cecelia Rappaport

    What is the best way to figure out costs to travel to Cuba? We mandatory to travel with a Tour Company/Travel Agency and they are all expensive. $5,000 per person seems to be the norm. Any suggestions? Where does all that money go?

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