Millions of holidays have to go…..

As we approach the end of another summer season, few tour operators will be jumping for joy as they examine their margins.

Many will have made enough money in the peak period of the last couple of months to fight another day, but nothing like the sums of a few years ago.

There were positive signs for the market this year. In terms of weather, we’ve had a stop-start summer in the UK, which always encourages people to travel abroad. Meanwhile, several companies cut back their number of overpriced Spanish holidays on the market, leading many observers to claim that, for once, supply was in balance with demand.

But of course, the rules have changed and supply can never again be balanced with demand. When you take into account the millions of no-frills flights on the market, there’s an enormous glut of holidaying opportunities for the public that has inevitably led to intense competition and price-cutting.

Despite the cutbacks, throughout the summer there have been plenty of discounts available, a sure sign that in real terms there is no matching of supply and demand.

People are now more knowledgeable about the market. Talk to any travel agent and they will tell you that virtually all their customers now automatically ask for a discount and many leave if they don’t get one.

Statistics will show a marked increase in internet bookings for 2005. Of course, the growth has been rapid over the past few years, but I believe this summer will be a watershed, with millions of people ‘dynamically packaging’ their own hotels and flights.

Many operators speak optimistically about the package holiday, claiming that talk of its demise is rubbish and pointing out that roughly the same number are sold each year.

Simple economics will tell you that you can sell anything as long as the price is right, but what’s right for the consumer won’t keep every operator in business.

Bookings to Sharm el Sheikh in Egypt, for example, have recovered pretty quickly since the July 23 hotel bombings which killed 70 people, but only because prices have been slashed by up to 50%. It’s amazing how Brits forget their fear when a deal is on offer.

The reality is that a huge number of bucket-and-spade packages will continue to be sold for as long as they are as cheap, or cheaper, than the trips people can put together themselves. This won’t last forever because operators have to make profits, so many will go to the wall.

Those that are left will have to radically reduce their overheads if they haven’t done so already (many have moved or are moving out of plush central London headquarters) to compete with the flight and accommodation-only providers.

Everyone talks about how the specialist long-haul operators, with complicated itineraries that people find difficult to package themselves, will be the big winners. Traditional Mediterranean packages will also be sold – but in a few years there will be millions less on the market than there are today.

The holiday revolution has only just begun.

*What’s your view of the future for tour operators? TravelMole would welcome your views by clicking on the link on this page.

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