Travel companies hope for cool summer as package prices are slashed

Travel companies are pinning their hopes on a cool summer to bring a much-needed bookings boost after being forced to slash prices by up to 50% for the early part of the season due to weak demand.

If there’s a repeat of last year’s heatwave, it will be ‘difficult’ for everyone, the Barclays annual travel forum heard.

According to Barclays Global Economic Update, bookings were up 12% at the start of the year, but ‘Brexit scare stories’ had led to a ‘really tough booking period’. Bookings picked up in April, after Britain’s departure from the EU was delayed, but only for certain products such as ferry crossings to France. "Generally we haven’t seen a spike yet," said Deloitte Partner Alistair Pritchard, but he added: "Consumers still tell us they want to go on holiday."

He said he expects to see stronger booking patters over the next two months, but added, it ‘largely depends on the weather’.

Paul Carter (left), CEO of Hotelplan, which owns several brands including Inghams, Explore, Ski Total and Esprit, said the price of some holidays departing this month had been slashed by 50%, while bookings for committed stock in June are down 30% to 40%. Bookings for July are up, but he said there is ‘still some way to go’ for August and September. Bookings to EU destinations have been particularly badly hit, with Explore bookings for Europe a third down year on year, although it has made these up elsewhere, added Carter.

"If it’s a hot summer, it will be really difficult for everyone."

Martin Alcock (right), director of Travel Trade Consultancy, said even luxury operators, who historically would have been insulated from the downturn, were being hit. At the Advantage Conference last week, Alcock said privately luxury operators admitted bookings were flat.

However, travel companies are still having to stump up for expensive online advertising, without the expectation of their spend resulting in additional bookings, or their search engine rankings will suffer. "If you are in the Google ad space you can’t afford to stop spending because you’ll drop down the search rankings, so it’s a double whammy of spending without attracting customers, but you have to keep spending because those with deep pockets are still spending," said Alcock, adding that the costs of online advertising has risen up to 20%.

The industy is facing other significant challenges, including low economic growth, labour shortages, wage inflation, the devaluation of sterling, rising business rates, a rise in the minimum wage and the cost of pension auto-enrolment for staff, said Prichard.

He said the industry was also being hit by industrial action across Europe and air traffic control strikes, it suffered severe disruption due to trespassing drones at before Christmas Gatwick and later at other airports, and it is suffering ongoing disruption from the grounding of Boeing’s 737 MAX aircraft for a safety update following two fatal crashes.

Pritchard said the latter was ‘pretty challenging operationally and very costly’, adding: "There is a role here for the whole industry in helping to re-install consumer confidence [in the MAX] because there are 5,000 of these aircraft on order and if consumer confidence isn’t there, there isn’t the option to replace these aircraft overnight; airlines would have to fly older aircraft which is more expensive and doesn’t meet the environmental challenges which the MAX would have addressed."

Despite the numerous challenges being faced by the industry, Pritchard said he remained optimistic.
"The really positive news for the sector is that consumers continue to prioritise spending on holidays," he said, adding that they were also spending more on experiences, such as trampoline parks, which is further good news for the industry as ‘travel provides great experiences’.

Transformational travel is expected to be ‘hot’ over the next year or two, as people ‘increasingly want to come back to work as something better than before they left’, said Pritchard, and there has also been a 204% rise in family-friendly holidays, he added.

Some luxury operators have reported strong results too, the cruise market has done very well, and solo travel is growing, now accounting for 17% of all adults, up 2% year on year, he added.