There’s a lot of constant noise in the travel media about how to save money on your vacation, on how to get more out of your travel budget. The problem is, most of that advice is focused on the wrong things. They’re playing around the margins instead of focusing one what really makes a difference when traveling on a budget: your destination.

$2 bed, $3 lunch in Nepal
In an old book of mine, I wrote in Make Your Travel Dollars Worth a Fortune that the main impact on your budget is going to come from where you travel, not how. Sure, there are many key factors that go into determining how much you spend on your travels, whether you are going for a one-week vacation or a year-long trip around the world. The primary one, however, is where you decide to spend your time.
This was true 20 years ago, 10 years ago, and last year. It’ll probably always be true unless flight costs triple or rising sea levels swamp half the places we could go. The destination has more of an impact on how much you will spend and the longer the trip, the more it matters.
Travel destination first, logistics after (unless there’s a major airfare sale)
No matter how well you plan your trip to Singapore or Norway, and no matter how good the flight price is, it’s going to cost you a buttload of money compared to say…Ecuador.
There was once an article in Budget Travel magazine they gave two writers a budget of $1,200 to travel with. The instructions were to go at least eight hours away for four nights and spend no more than that amount. One went to Tokyo and one went to Quito. You can probably imagine how that worked out.
Basically the guy who went to Quito, Ecuador lived it up, ate well, and stayed in really nice hotels. This was his description of his last night at one of the best restaurants in town: “From the ceviche sampler to the grouper in a spicy cream sauce, everything was extraordinary. Along with champagne, dessert, half a bottle of sauvignon blanc, and tip, my total was $75.”

A $2.50 haircut or $15 massage in Quito
The guy who went to Tokyo—back when the exchange rate was not so favorable as it is right now—had to be really careful with his money. He slept in a room that was 8′ by 10′ for $70 and mostly ate ramen noodles and vending machine food. “I kept my spending down by using a three-pronged method: eating at establishments that don’t employ waiters, never taking a taxi, and engaging with the locals.” He still had a good time, but it was tough making the math work.
Ramen noodle budget or eating out every meal? Capsule hotel/hostel bed or boutique hotel with soft sheets and plush toiletries? Taxis when you want or waiting for the bus? Amazingly, these two options can be the same price. It just depends on where you go.
There are a few caveats of course. There are five-star hotels everywhere almost, so you can spend a lot of money anywhere if you go first class all the way. Still, a suite at a chain hotel in Quito is going to cost you a whole lot less than a comparable one in Oslo. Back it down to 3-star level or hostel level and the gap is even wider.
Plus flight prices can tip the scales a bit on a short vacation. If you find a return flight to Ireland for $700 and one to India is twice that much, it’s probably a wash on the total expenditure for a week’s stay because you don’t have as much time for all the other costs to make up the difference. If any international destination is less than $500 from your home airport in the USA or Canada, it probably makes sense to snag that deal regardless.
The cheapest places to travel will make you feel rich

$20 for two with wine and tip in Buenos Aires
I just spent two months traveling around Europe and apart from 17 days in Hungary, I was not in any of the bargain places featured in The World’s Cheapest Destinations book. So when we went out to eat in countries like Holland, Germany or Italy, it was not uncommon to spend $50 or $60 on dinner. A dinner that would have been half that much or less in Bulgaria, Albania, or Montenegro.
The last time I went to Ireland, I was really glad I didn’t try to visit during my backpacker days. Prices were on par with what I would spend in a city in the USA, but they’re in euros, not dollars. Since the place is flooded with moneyed tourists on top, hotel prices are higher than they seem like they should be. Then if you go from there to London, prices will go up even more.
I paid more than I have for a long time on nightly hotel rates in Italy and Spain on this last trip, as in $150 per night for something that would have been $50 or $60 in Greece when we were there the year before.
When I go to a country like Vietnam, Bosnia, or Guatemala though, I feel like a rich man. I can get a decent hotel for less than $25, a full meal for less than $5, and a taxi across town will cost a few bucks. Almost everything I could possibly spend money on is going to be a fraction of what it costs in other destinations. If we’re comparing prices to Iceland for a hotel stay, a beer, or restaurant meal, it can literally be 1/10 the price for some items.
If you’re traveling on a budget with a partner, the costs become doubly important. If you’re traveling long-term with kids, you need to pay even more attention to destination costs on the ground because you have more mouths to feed, more admissions to pay, and you need more beds.
Other cost factors related to the destination
Most people don’t think much about why cheap destinations are a bargain and expensive ones will break the bank. Supply and demand have some impact, but the more powerful factor is local wages. The place may feel like a great deal to you because of where you’re coming from and the wages or savings you’re spending there. For the locals it’s a different story.
A country where the average wage is $800 a month is going to cost a lot less than one where the average wage is $4,000 per month or more, as it is in the home countries of most people reading this blog. Low wages impact not only human services, like a shoeshine or a taxi ride, but also prices that trickle down from a macro level: real estate prices, taxes, manufacturing costs, and transportation of goods costs.
So it’s no mystery why a hotel in New York City is more expensive than one in Omaha, much less one in Tbilisi or Trang. Real estate costs per square foot, property taxes, and employee wages are all far lower. The same goes for restaurants and bars, especially if you eat and drink what’s local.
When items have to be imported though, at international rates, that can impact the equation. Coffee is a bargain in Colombia, but expensive related to some other things in countries far from the tropics. Wine is almost free in Europe, but quite expensive in most of Asia.
Then you get the direct impact of lower labor costs when you employ a local for a service that mostly just requires their time. It’s why massages are such a bargain in Thailand and Cambodia, why I can get a haircut for $3 in Mexico, and why you can hire a driver for the day in some countries for less than the price of a rental car. (Keep this in mind when bargaining over an amount that’s a pittance in your world but an impactful amount in theirs.)
So remember, if you are traveling on a budget, then keep your travel options open to get the best deals on the biggest expenses. But if you want to make a huge difference with just one choice, pick one of the cheapest destinations to start with.
Want to see more specifics? To get an idea of costs on the ground, check out rundowns from my travels of travel prices in Thailand, Albania, Greece, Bulgaria, Vietnam, Ecuador, and Bosnia. Stay tuned for upcoming round-ups for Hungary and Spain.
Interested in staying somewhere for months or years instead? See my rundown on the cheapest places to move to around the world, as a nomad or permanent resident.
Opy
Tuesday 7th of January 2025
Fantastic tips for traveling on a budget! I especially appreciate the advice on finding affordable accommodation and transportation.