Comment by Jeremy Skidmore: Cut capacity or risk failure

Thursday, 03 Oct, 2003 0

This year has been one of the worst in living memory for the travel industry. But it’s been marvellous for holidaymakers. Consumers like nothing more than to hear the industry is suffering and profits are being given away in the form of discounted holidays.

Surely there’s never been a better time for the opportunist traveller looking for a late deal. Throughout the summer there’s been an abundance of £99 deals and even the top specialists have been slashing their prices.

Unless something changes, there’ll be operators big and small facing financial failure.

Of course, the answer is for tour operators to cut capacity, reduce the number of holidays on the market and be able to push up prices. They’ve been talking about this for years, without actually doing it. But this time, at last, the message might be getting through.

The dinosaurs will bang on about how the package holiday is very much alive and there’s still a huge market for it. Package holidays are still popular and will remain so for years to come – but they are much less popular than they used to be. And there’s only a huge market for packages if you discount them heavily. You could sell 20 million of them if they were priced at a pound each.

The reality is that there’s a shrinking market for mass-market packages at a price that will reap a decent return for tour operators. There are just too many attractive alternatives in the form of low-cost flights and cheap accommodation deals on the Internet.

As Thomas Cook trade relations director Ian Derbyshire said: “At the moment, the capacity does not warrant the demand.”

And it will be the same story when we get into peak season next year unless some serious trimming is done by the big four.

In the current climate it’s time to bite the bullet and budget for profits instead of sheer size.

Read previous comments by Jeremy:
19-Sept-2003 Comment by Jeremy Skidmore: Wise up over commission cuts
04-July-2003 Foreign Office advice needs to be clearer: Comment by J.Skidmore
01-July-2003 Expect more long-haul consolidation: Comment by J.Skidmore