Travel firms need to account for a polarisation in holidaymakers’ spending power in turn-of-year campaigns and prepare for a “price game”, delegates at this year’s Travel Weekly Future of Travel conference were told.
The warning came ahead of this week’s plunge in the value of the pound to a record low, which led to some mortgage deals being withdrawn and fuelled fears interest rates could reach 6% next year.
Travel firms predicted cost-of-living rises could result in a bigger gap between customers who can afford a holiday and those who cannot, while triggering other changes such as holidaymakers trading down on duration or price and increased demand for flexibility and trusted brands.
Hays Travel owner Dame Irene Hays said a study by market research firm Kantar in June showed 73% of consumers were unaffected by the crisis and cited reports from earlier this year of consumers sitting on Covid savings of £1.7 trillion.
She said: “There is a polarisation of the market. Demand has grown for both luxury and package holidays. It is really important travel companies focus on both groups with a degree of sophistication moving into their turn-of-year campaigns.”
She said Hays Travel planned to put “more focus” on easy payment plans and low or 0% deposits to help customers hit by price hikes.
“We have to be mindful of the challenges many will face because of the cost of living and deal sympathetically with that group of people with good-value holidays and easy payment plans. We will give that more focus,” said Hays, who said a zero deposit offer on selected holidays was planned this weekend.
“We don’t know how bad it will get, but we’re keeping a very close eye on it,” she added.
The impact of energy price rises, capped for businesses for six months, was currently being analysed by the company, she said.
Travel Counsellors chief executive Steve Byrne reported a “profound increase in booking values” and, as yet, no sign of the current crisis hitting bookings.
But he conceded: “What none of us know is the cost-of-living impact [against] demand from people to experience the world.”
EasyJet holidays chief executive Garry Wilson predicted a “price game” as the likely outcome of the crisis, but said customers would also want flexibility, shorter durations and trusted brands.
He said: “We know customers will not give up on their holidays, but shop around. It will be a price game for the same holiday but it will also come down to flexibility and different durations. [People] will look for the ability to look after customers if it goes wrong.”
Joe Ponte, chief executive of Hotelplan UK, agreed: “It will have an impact on buying patterns. We are confident our customers will keep travelling, but they may trade down with their bookings.”
Dnata Travel Group UK and Europe chief executive Ailsa Pollard anticipated customers would take fewer holidays, while Jet2 chief executive Steve Heapy said customers would book with companies that treated them well during Covid.
P&O Cruises president Paul Ludlow was confident consumers would “sacrifice everything else” rather than a holiday. Airlines UK chief executive Tim Alderslade agreed: “People want to travel.”
