We are receiving very mixed messages about the health of holiday sales in this traditional peak booking season.

A headline in the Daily Express on January 6 said that British holidaymakers were ‘defying the downturn’ and splashing out on foreign breaks with gay abandon.

But sometimes you have to take Express headlines with a pinch of salt. We have also heard that ABTA is taking the unusual measure of appointing a PR agency to run a campaign – beginning next week – to restore consumer confidence in booking holidays. So it must be a tad concerned.

And, anecdotally, one hears family, friends and colleagues ruling out holidays to the US and Europe this year – which account for UK holidaymakers’ top three destinations (France, Spain and the US) – because they recognise the plummeting value of sterling against the dollar and the euro.

Over the new year I took a break to Palma in Majorca, one of the UK’s favourite holiday gateways, and was shocked at my reduced purchasing power there. Meals are about 50% more expensive than a year ago.

Having decided to treat my family to a five-star hotel for once – the fabulous Grupotel Valparaiso Palace – it was also immediately apparent that there were very few fellow Brits around.

Despite the Valparaiso’s excellent service, there is little doubt Spain faces a growing competitive threat from non-euro destinations such as Turkey, Egypt and Croatia. 

One suspects the real effects of the growing recession at home and sterling’s devaluation have yet to be felt on the wider travel industry. Even if the volume of holidays to the main destinations holds up, we’ll inevitably see shorter breaks and lower spend on the extras – car rental, excursions, meals in hotels – which will hit profit margins.

For top destinations such as Spain, this creates a dilemma. Do tourism and hotel bosses cut prices to compete more effectively, or do they position their product as more upmarket, hoping that consumers differentiate between budget sun and special treats?

The answer has to be a combination of both. I will be returning to Spain, simply because it is so unique and convenient, but I will be staying fewer nights unless the prices come down a little.

The Brits don’t want to desert their beloved ‘Costas’, but there is little room for complacency in an increasingly cost-led short-haul market.