Long’s words a tonic for the industry
Comment by Jeremy Skidmore (www.jeremyskidmore.com)
The best news for the travel industry – and perhaps the worst for the holidaymaker – is the announcement by TUI Travel that it is cutting capacity for next year.
We all know that the majors are doing OK this summer, mainly because they have cut back this year and the credit crunch only started to bite after people had either paid for a holiday or made the decision that they were going to have one come what may.
There are fewer late discounts around and both TUI and Thomas Cook are enjoying higher margins.
Next year will be tougher. Prices will rise – perhaps around 15 per cent or more – and people will have less cash, particularly if they’ve had to renegotiate fixed mortgages.
Still, in the ‘pile ‘em high, sell ‘em at any price’ days of yesteryear, the majors never worried about the vagries of the economy. If they’d had a good summer, it meant only one thing – capacity would be piled on next year to try to gain market share off your rivals.
The result was pretty disastrous for anyone trying to compete in that market.
But TUI Travel chief executive Peter Long is more interested in profits than market share. He knows that the oft-quoted saying that ‘holidays are a luxury, not a necessity’ is set to be sorely tempted next year and any operator with excess capacity may have to slash prices – and margins – to shift it.
The change in mindset at the top level of tour operating is marked. Concerns with market share among the top two have all but disappeared.
Next year, with the capacity cuts, there is a chance the trend towards higher margins and less discounts can continue, despite the poor economy.
What’s good news for the industry is often bad news for holidaymakers, of course.
But they’ll receive little sympathy from those in the industry who will argue that holidays have been unrealistically cheap for far too long.
Jeremy Skidmore
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