The industry is in trouble if you believe the Daily Mail. “Desperate holiday firms are slashing prices amid a collapse of bookings and profits,” it said on Saturday. “Many are giving up on the idea of a sunshine holiday.”
The Mail reported companies offering big savings on summer 2011 brochure prices.
Discount deals are not what tour operators want in July, but they are hardly remarkable.
‘Research’ by online bank ING Direct suggested “as many as four in 10 Britons are going without a summer holiday to balance household finances”.
That is not remarkable either: serious surveys show that proportion is the typical figure for those who do not take a holiday away from home each year.
Times are tough. In the words of a senior industry figure last month: “Everything is late. The margins are diabolical.”
Thomas Cook was reported to have slashed its margin on late sales this week and Gill’s Cruise Centre went down at a cost of possibly £10 million to the cruise companies.
Yet the cruise lines themselves describe the market as “in good shape” and latest figures from industry analyst GfK Ascent paint a more complex picture.
Bookings in June
Summer 2011 bookings in June were 3% down year on year. GfK Ascent managing director Sarah Smalley suggests this is because a reduction in operator capacity is working. “There are fewer holidays to sell at the end of the season,” she says.
GfK Ascent reports a 1% increase in the value of sales, suggesting “there has not been wide-scale discounting”. Smalley says: “A four-percentage point difference between volume and value at this stage is positive.”
The season-to-date position to the end of June also confounds the doom-mongers. GfK Ascent reports high street sales down 2% in volume year on year, but 2% up in value. Smalley says: “High street agencies must, on average, be performing at a higher level.”
Package holiday sales have outperformed the market to date – up 1% on a year ago. All-inclusive sales were up 12% at the end of June. Short-haul sales were up 5% in volume and 11% in value. It is the long-haul market that is suffering, with bookings down 10% year on year.
Market pointers
A few other points are worth noting. The squeeze on consumers does not extend across Europe. Thomas Cook and Tui Travel are doing well in Germany and Scandinavia.
The high rate of Air Passenger Duty is probably hurting long-haul sales, but the evidence is inconclusive. GfK Ascent reports summer 2011 bookings to Mexico up 38% year on year in June, when flights to Mexico carry the same APD as to the Caribbean. US government figures show a 6% rise in visitors from the UK.
GfK Ascent also reports a year-on-year rise in sales for this winter and “encouraging” growth for early summer 2012. Smalley says: “It was a very positive June. All three seasons outperformed last year for passengers.”
Latest UK outbound figures from the Office for National Statistics also suggest a market in recovery, although reports that travel was back to the level of 2008 were wrong. Holiday departures in May where 11% up on a year earlier and just 2% down on May 2009.
Total outbound trips, including business travel, were up 1% on two years ago, making it the best result since the recession.
None of this changes the fact that the squeeze on UK consumer spending is making life hard. A lot depends now on late sales and whether companies slash prices.
