Industry observers are predicting discounts hitting the 20% mark after a lacklustre start to the crucial post-Christmas booking period.
The first three days of trading between Christmas and the New Year showed the summer 2000 market down around 30% compared to the same period last year.
While trading after the January 3 Bank Holiday improved, the major operators were still showing significant decreases year on year.
Thomas Cook retail managing director Andrew Windsor predicted discounts will reach 20% at some stage.
“If we are still struggling by next weekend, we could see some companies panic,” he said.
Observers said any further increase in discounts will put JMC and Thomson in a catch-22 situation.
“Airtours and First Choice have funded discounts by raising brochure prices,” said one source. “JMC and Thomson only marginally increased prices and will consequently be reluctant to hike discounts further. They will want to remain competitive but will see margins eroded heavily if they follow what others do.”
But JMCsales director Dennis Wormwell said customers will study brochures and compare prices rather than just book because of a headline discount. He already believes the current drive is too aggressive. “I consider even 10% plus free insurance is excessive,” he said. “We have turned it into a commodity. It seems to me that the sale never ends. I’d like to say that discounts won’t rise any further but nothing would surprise me.”
JMC managing director Simon Vincent added: “There is no question that rivals have loaded their prices but the panel price is very important and we are happy with our position.”
Operators and retailers all put a brave face on the poor start, blaming millennium fever and the unusually long holiday for customer disinterest.
Holiday Hypermarkets reaped the benefit of being one of the few retailers open on Bank Holiday Monday. Managing director John Donnelly said his 21 shops had done £1.4m of business on the day.
First Choice sales director John Wimbleton predicted the market will pick up.
“There was complete disinterest between Christmas and New Year but it is always a quiet period,”he said. “On December 30, business ceased completely because people were preparing for the millennium celebrations. But there is pent-up demand. Business after the new year was roughly on a par with last year so there are already signs the market is picking up.”
He added there is growing demand for late winter deals.
Thomson sales director Manuel Mascarenhas said: “Brochure pick-up has been in line with last year but sales are down. People are only just getting round to thinking about booking. It’s not unexpected and is largely due to the millennium effect.”
Cosmos sales and marketing director Paul Riches said the focus on securing early bookings will inevitably have had an effect on January sales. “For the past few years, January has drifted away because, as an industry, we are getting more early bookings,” he said. “The market was 5%-10% up prior to Christmas so it will fall back.”
Riches added there was concern that operators would panic in light of poor post-Christmas sales and raise discounts or release cut-price brochures.
Going Places has suffered more than most with managing director Terry Fisher admitting its own share was ‘not as good as it might be.’
It is now expected to alter its campaign from the current ‘mega sale’ slogan to a 15% discount on all Airtours products.
The multiple is already offering Panorama at 15% off plus free insurance.
First Choice UK distribution managing director Peter Shanks said Travel Choice, in its first peak season, had a solid start.
“Because we had no shops last year we have no comparative figures. But we are pleased with business so far,” he said. “Prior to Christmas, the market was 5% up. The economic signs are good and people are travelling further afield,” added Shanks. “There are very aggressive deals already.”
TABLE: Downward spiral: will discounts increase further?