The positive travel numbers in the latest Office for National Statistics (ONS) figures will have buoyed the industry. In the three-month period from May to July both outbound and inbound travel figures rose.
The number of visits abroad by UK residents increased by 3% in the three months and the number of inbound visits rose by 2%. However, this boost is to be expected during the summer and in all likelihood will be short-lived.
A 4.5% rise in inflation in August emphasised the intense pressure on already austere consumer budgets, and with expectations of a further increase before the year is out, it is unsurprising that one third of Britons are expected to sacrifice a holiday this year.
Wages are falling in real terms and, with utility prices set to rise, many travellers are thinking twice about how they spend their money. Booking lead times are shrinking and, as a result, eating into precious operator margins. There is no question the industry has a tough few months ahead.
The failures of Turkey specialist Holidays 4U last month and of school-tours organiser Pinnacle Travel this week highlight the pressures being felt, particularly by niche operators. Margins are tight and cannot be stretched much further. Operators across the industry are having to work harder for sales, offering incentives to customers and agents alike to ensure bookings are confirmed.
This is unlikely to be sustainable in the long term, especially for those businesses operating at the margins. Further failures and profit warnings could be on the horizon.
For many travellers this will serve as a powerful reminder of the benefit of booking packages via Atol-protected, Abta-type agents. While the industry seeks clarification on the future of the Atol scheme, we may find increasing numbers of holidaymakers choosing to book packages with agencies covered under these types of guarantee.
In an increasingly austere environment where many are working longer and harder hours, the risk of a holiday falling through without a safety net may simply not be worth it, in spite of the often cheaper independent offers available. I am certainly not declaring the end of the dynamic package, but I suspect we may see a dip in its popularity among certain groups of travellers, such as families.
We are seeing many operators adopt practical and flexible steps to navigate this challenging climate. The industry is having to find ways to sustain volume without negatively impacting already diminishing returns.
Results from Travelodge this week highlighted the upside of discount pricing, and across the broader landscape we see payment terms with suppliers being amended to ensure operators are less prone to supplier failure. There has also been added emphasis on online marketing and distribution capabilities.
Such positive engagement will serve the industry well as it steers through the challenging months to come.