This year, the travel industry appears to have struck
the right balance of supply and demand, by ditching capacity to
boost profits.
Both Thomas Cook and First Choice have revealed much improved
half-year financial results, with both citing a better balance
between supply and demand as one of the core reasons behind the
figures.
This backs the general view by industry experts that proper
yield management has finally been put in place across the
trade.
ABTA president Martin Wellings said it was the first time he
could ever remember operators getting capacity levels right. He
said: “It’s one of the keys to success in the industry.
For the first time ever, they [the operators] seem to have got it
right. For years they have been just talking about passengers.
Proper yield-and-capacity management can make all the
difference.
“For everybody concerned it’s better that
we’re profitable and things are sold profitably.”
UBS Warburg leisure analyst Julian Easthope said the big public
companies have been forced to focus on margins instead of capacity
to please disgruntled shareholders.
He said: “There is a growing belief that the industry has
got it right with capacity. I can’t remember the last time
this was the case.
“The shareholders have got fed up with the appalling
performance and volatility of the industry.”
First Choice has said it is on track to meet meet analysts’
full-year profit prediction of between £108 million and
£115 million, beating last year’s £98.3 million,
after slashing its first-half pre-tax losses by 10% from £50.9
million in 2004 to £45.9 million this year.
The company has cut mainstream summer 2005 capacity by 2%, a
massive 33% has been taken out of the ski business and 6% from the
mainstream winter product.
First Choice chief executive Peter Long said capacity cutting
has led to a market, “in which supply and demand looks to be
better balanced than has historically been the case”.
“Fewer holidays are being sold at a discount in the lates
market.”
Thomas Cook claims to be on target to
“significantly” beat last year’s record £51
million profit and record mass-market-leading margins of almost
5%.
“This year has seen a healthy market for package holidays,
with supply and demand more closely balanced than ever across the
travel industry,” said UK chief executive Manny
Fontenla-Novoa. “As a result, there is less excess capacity
to be sold off cheaply, leading to a higher than average holiday
price.”
MyTravel will announce its half-year results next week with
analysts predicting reduced half-year losses and group full-year
pre-tax profit of up to £44 million. The group has slashed its
capacity for this year by up to 500,000.
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