The soaring fuel price and other rising costs risk eating into margins on holidays priced before the jump in inflation, now forecast to hit 9% this year.
Tom Jenkins, chief executive of European tourism association Etoa, said: “People are having to deliver product often sold in 2020, relying on contracts written in 2019. People are having to operate on 2019 pricing, but there is a very different cost and supply base in 2022.”
Bank of England governor Andrew Bailey warned this week of “a historic shock to real incomes and spending”.
Sunvil Holidays chairman Noel Josephides noted rising costs, although he said the operator was currently able to counter them with higher prices.
“People are paying anything [for holidays] at the moment,” he said.
“We’re maintaining a margin for our European business, which at this stage is incredible. We’ve not noticed any reluctance to book. Normally bookings would be dropping off by now, but we’ve not seen any drop-off.
“We are getting price increases on tailor-made stuff. Hotels are saying ‘forget net contracts’ and prices are certainly going up, but we’re not meeting any resistance [to rising prices].”
Josephides insisted: “There is no nervousness about the cost of living within our market. The only problem we face is the fuel surcharge on charters, which to Greece is £12.50 per person.”
But he said: “I would expect the impact in the volume market to be considerable.”
The continuing war in Ukraine also appears to have had limited impact on demand to date. An industry source noted “even the American market [to Europe] is holding up” but said: “The problem is the bookings were all made on 2019 contracts in 2020 prices.”
Jenkins agreed: “There has been very little impact on western Europe, and North American demand [for Europe] is robust at about 60% of 2019 levels, although there is obvious concern about going to the Baltic countries and to Poland.”
However, he said: “Asia is a dead zone. China and Japan don’t permit travel, the no-fly zone over Russia is adding two to three hours to flights and airlines are adding fuel surcharges.”