Current trading has become “less clear cut” with a widening performance gap between small and medium-sized travel businesses and large corporates, the Aito Overseas Conference has been warned.
Travel Trade Consultancy director Martin Alcock said the industry was “probably in a better place than last year” but admitted it was “not great” for many tour operators in the current market, particularly smaller specialists.
Alcock said the fact the total market for Atol holders had reached 33.3 million passengers – the biggest in its history– suggested there was optimism among the larger players for 2025 but noted 85% of the capacity was now held by the top 10 Atol holders.
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Recent trading reports have been update with additional capacity announcements by top 20 Atol holders for this winter and next summer, he said.
He said: “You are seeing a divergence of large and small companies. Jet2 has been very bullish but I don’t think you are seeing that outside of the larger corporates.
“Smaller businesses are genuinely more fearful and more cautious than we have seen in the last two years.”
On holiday prices, he said: “Average prices are still seeing some increases, there is positivity in the market, but it’s less clear cut. It’s difficult to pick a clear trend.
“Generally speaking we are seeing passenger numbers go up but less than prices. Price is the main driver of growth.
“In an Aito environment that means that there is less business but it’s better business.”
He cited the new government’s downbeat rhetoric as partly to blame for some doom and gloom in the market as well as a “more challenging inflation issue”.
“Things are in a slightly downward trend. A lot is because of the rhetoric of the new government,” he said, adding: “Last year we were facing a very different set of circumstances.”
Inflation fell below 2% in October, but has crept above the government’s target this month, while interest rates have also started to fall, but slowly, he said.
“In 24 months we will be around 3.25% [according to predictions]. The question is how quickly we get there,” he said.
While some fears about Labour’s recent budget did not materialise, businesses were also facing hikes in National Insurance which could cost around £1,000 per head per year. “It’s a pain for small businesses and for larger businesses even more painful,” he added.
However, he noted that recent Barclaycard data showed consumers were cutting back on spend on eating out but not on travel.
He said: “Travel is outperforming all other categories. Generally customers are spending less, but what they are spending, they are spending on travel.”