Travel agents are already being warned next summer’s late package market will have even fewer options and be more expensive than this year.
TUI Travel UK and Ireland distribution director Nick Longman said the capacity cuts following the merger of the big four have been a key factor for strong pricing in the lates market this summer.
And with TUI Travel and the Thomas Cook Group announcing further cuts for next summer, agents trying to make customers happy face an even tougher market next summer.
Longman said: “I certainly don’t think (the availability of late deals) is going to be any better than this year as we know all the operators are taking capacity out.
“The man on the street will notice these capacity cuts and I think the country has noticed the level of discounting has been pretty reasonable from the tour operators’ perspective.
“The consumer will notice there’s going to be even less availability in the lates market next year.”
While Longman refused to speculate about what sort of prices consumers will face, it is interesting to note recent results of the big two, which were released in August.
Following the merger of Thomson and First Choice, TUI Travel’s third quarter results ending June 30 showed there was an overall capacity cut of 13%, which saw an increase of 15% in the average selling price compared with the previous year.
In the six weeks up until the end of June, when the lates market kicked in, the average selling price was 20% up on the previous year.
The Thomas Cook Group’s unaudited results for the six months up until April 30 showed the group reduced its overall capacity by 10% for summer 2008. The overall price of holidays increased by 6% as a result, and rose by 14% in the last six weeks of the results period.
Already both groups have announced capacity cuts for summer 2009. TUI Travel will strip out 15% while the Thomas Cook Group will reduce its programme by 7%.
Thomas Cook UK executive board director holiday division Ian Derbyshire agreed that these changes will continue to have a knock-on effect.
He said: “I expect tour operators to go into the lates market with less to sell than they did going into this year, and that was with less to sell than in 2007. For customers booking late it will be very expensive.
“There will always be a lates market but in terms of the price and deals for the customer they get a better deal by booking early.”
Derbyshire added the capacity reductions are also being driven by the big twos’ increasing focus on the medium haul over the short-haul market. The Thomas Cook Group cut its short-haul capacity by 22% compared with 2% in the medium-haul market.
TUI undertook similar cuts by slashing 24% of its short-haul capacity compared with 4% in the medium haul.
Derbyshire added: “We’ve been very clear about our strategy of reducing our short-haul destination (capacities) and going into medium haul, if you move away from short haul into medium haul that reduces the number of flights we can do.”
Both agreed consumers who do hold out for the lates market will find packages available, but not necessarily for their preferred choices or at the same prices they’ve enjoyed in the past.
Longman argued pricing aside, the change in capacities will benefit the consumer, adding: “When you cut capacity it gives you the opportunity to review your product that you want to sell – the stock you eliminate is the worst performing stock.”
Economy will have the biggest impact
Travel agents remain undecided as to how summer 2009 early sales will go due to a number of competing factors.
Scottish Passenger Agents’ Association spokesman Sandy MacPherson said whenever it has urged consumers to buy early to get the cheaper prices, tour operators introduce additional late capacity with the ensuing price cuts.
He added: “Whenever we say book now or you’re not going to get a cheap holiday they just don’t believe you. It’ll take at least a year for people to realise this.”
However, Kinver Travel owner Sue Foxall said consumers are beginning to wake up to the changing markets but argued it is the state of the economy that is causing most concern.
She added: “It’s been a slow start to summer 2009 and too early to say whether consumer pessimism will have an impact on forward bookings.”
Kitts Travel director Andrew Rowdon agreed the economy will have the biggest impact on next summer’s sales and argued the big two are talking about next summer’s lates market because it is in their interests to drive early sales.
However, Chris Bailey congratulated the big two for their capacity cuts and said: “Will summer 2009 enjoy strong early sales? To large families and people who need to plan ahead, yes. To people with a degree of flexibility, no, as these people will not book this far in advance.”
Capacity cuts essential
While next summer is already looking tight in the bucket-and-spade market, independent operators are warning of a similar situation.
Association of Independent Tour Operators chairman Derek Moore said although it was impossible to guess what capacity cuts smaller, independent tour operators are considering, it wouldn’t be too different from those being made by the mass market operators.
He added: “Any tour operator worth its salt will be reviewing what it is doing over the next year and establishing the size of its programmes – capacity cuts force prices up and reduce the late availability, which helps.”
While he believes capacity cuts this summer had an effect on the market, he added consumers’ buying habits will remain unchanged for 2009.
He added: “People this year who didn’t get out when they wanted, because it was too expensive or the availability simply wasn’t there, might book a bit earlier next year. But it takes at least a year for this sort of thing to trickle down.”
Peltours sales and marketing director Darren Panto said the Egypt specialist enjoyed such a strong lates market this year it was even able to put prices up by about £50 at the height of the market, a trend he expects to continue, providing operators avoid the temptation to introduce additional last-minute capacity.
He added: “The majority of the late sales have been strong and have been rising in price. Anyone who’s had capacity has been able to take advantage of that as there’s been a lack of availability for the summer.
“A lot of consumers have had to wake up to this. Many people can’t believe the prices when they’ve called a week before departure and they find there’s nothing available. They get quite angry.”
Cox and Kings senior product manager Nigel Hosking said the operator has little involvement in the traditional summer sun market and has made no capacity reductions for this year or for next.
However, he agreed the operator has seen the benefit of a reduction in capacities across the trade, adding: “It’s a possibility that consumers who are struggling to get spaces with the large operators are coming to us instead.”
