The heatwave, a lack of capacity and high prices are having a devastating impact on late sales outside of the traditional package holiday sector, say suppliers and agents.

Supplier On Holiday Group likened a reported 20% slump in online travel agent sales to the impact of UK airspace closure in 2010 due to the Icelandic ash cloud when business slumped 25%.

Travel agent consortium Advantage concurred, but advised members not to write off the lates saying people with money were still looking to book.

Julia Lo Bue-Said, managing director of Advantage, said: “There has been a softening of the market after a good six months and agents are having to work that little bit harder.

“What we have done is put a real focus on heatwave Britain. Customers may not be able to go abroad, but maybe we can help service them for a stay-at-home holiday.”

Bue-Said believes there is a gap in the market for more package suppliers outside of the Big Two, as this is what agents are increasingly looking to sell and consumers are demanding.

“In the past, when there have been big failures, we have seen a resurgence of smaller operators but there are not many of those around,” she said.

Tui Travel and Thomas Cook appear comfortable, having cut capacity in line with a 2% fall in Summer 2013 sales to June, according to GFK – enabling them to increase prices.

OHG chief executive Steve Endacott said customers with money were trading up to major operators’ differentiated product, leaving the commoditised market to suffer.

He predicted the sales decline would last as long as the heatwave, which forecasters say could continue for the rest of July.

“Rather than delaying the booking decision, it may be simply removing customers from the market,” Endacott said.

Another factor said to be impacting on sales is an increase in cash payments as people look to pay off their credit card debts.