Pessimism is sweeping the UK travel industry in the run-up to 2009.
Record fuel prices, a devalued pound against the euro, declining house prices and tighter consumer spending make summer 2009 seem like the cliffs of Dover – with the industry heading over the edge like a colony of lemmings.
The sensible reaction is to plan an escape tunnel and dig for golden nuggets of opportunity.
Given future pressure on selling prices, supply costs become the key focus. For example, beds in the eurozone will see a 20% year-on-year cost increase against non-euro destinations.
Therefore, agents may be wise to focus early sales efforts on five-star all-inclusive product in Turkey and Egypt and switch-sell from traditional Spanish haunts.
The key threat to cheap beds comes from eastern Europe, especially Russia – a real issue, given the core destinations for Russians are Egypt, Turkey and Cyprus (due to lighter visa requirements). Expect packed resorts and overbooking problems in these destinations for the next few years.
Logically, as fuel prices push up flight costs, customers will revert to longer 14-night holidays and less frequency. Have you planned for this in marketing? Why not focus on the holiday cost per day?
Although fuel prices will undoubtedly drive up airline costs, unless major operators cut capacity again for summer 2009 the expansion of low-cost carriers in their routes will probably keep prices at summer 2008 levels, forcing them – not the customer –to absorb the bulk of the rises.
This is bad news for operators and airlines, but potentially a lifesaver for agents if a bounty of distressed seats continues to drive a thriving dynamic packaging market.
Airlines argue they will cut capacity rather than damage yields. But can they afford to sit such expensive assets on the ground in summer and winter? My experience says no, but perhaps I’m just a smug dynamic packaging prophet.