The leisure trade must expect tough times next year with fewer people travelling, two leading industry figures have warned.
TUI Travel UK managing director Dermot Blastland told the Airport Operators Conference in London: “We assume there will be less overseas travel with the weaker pound, high fuel costs and poor economy.”
Both he and Monarch Airlines managing director Tim Jeans also warned of limited long-term growth for UK airlines.
Jeans described summer 2008 as “very strong”, but said fuel costs would rise next year and be passed on in higher fares despite the falling oil price – as hedging, or advance-purchase fuel deals, run out.
Monarch will pay almost 25% more for fuel next year, he said, adding: “This will have a dampening effect on travel.”
Jeans warned: “The outlook is grim. There is real pressure on yields.”
Blastland agreed: “Price may be a major issue for the next 24-36 months.”
Pressure on fares would also come from reduced scope for airlines to add ancillary charges, said Jeans. “We have taken enormous flak on ancillary fees, but they gave us the opportunity to keep ahead of rising fuel costs. We do not have that option next year.”
He suggested the low-fare boom had peaked, saying: “There is a limit to how much you can stimulate demand even with give-away flights. I do not see endless growth for airlines.”
Blastland agreed: “We do not see a lot of growth.” But he said: “The main holiday remains important.”
A TUI Travel survey, which asked clients how they plan to reduce spending in the next year, found just 23% put their main holiday in the top three for cuts and only 12% made cutting it a priority. Spending on eating out, drinking, cars and home improvements were all more likely for the chop. However, 36% of consumers placed short-breaks in the top three for cuts.
Blastland said: “People are trading down and the most-economically challenged families may be exiting the market. Bookings for 10-11 nights are up dramatically.”