PwC tells travel industry to hold its nerve on pricing

Travel companies should hold their nerve and not panic into cutting prices too soon.

That’s the advice from PricewaterhouseCoopers LLP, based on the results of a poll of 2,000 British consumers.

“For a few years we have seen booking patterns getting closer to departure date,” said Malcolm Preston, the company’s head of travel.

“The industry was doing its best to reverse this trend with exclusive deals, reduced capacity and more differentiated product.

“However, despite these efforts, the pattern that is starting to emerge in 2009 is that people are prepared to wait for the late deals (which are doing well) – still determined to take a holiday but not willing to commit six months ahead.

“It is vital that companies hold their nerve, do not panic into cutting prices too soon and remain flexible in what they offer consumers.

“As the UK acclimatises to the recession and their potential change in discretionary spend, every household is adapting their approach to preserving the holiday.

“The businesses that can meet this spectrum of coping mechanisms will see out the recession.”

According to the PricewaterhouseCoopers research, over two thirds of those polled will trade down from their usual level of holiday, but only 16% will stop going on holiday altogether.

Aside from cutting back, 25% of the 2,000 polled will take a cheaper holiday in the same location by:

– Staying in a cheaper hotel
– Opting for self-catering
– Taking cheaper transportation / airline
– Waiting for a last minute deal
– Cutting 14 nights to 10

However, the intention to cut back on holiday spend is less rife than it was last year.

In a previous survey, 20% more respondents said they were prepared to take fewer holidays in Summer 2008 than six months later, and a fifth more were intending on cutting their holidays altogether in that previous.

“Despite tough trading conditions the country’s transition from credit crunch to full-blown recession seems to have been met with some resilience in the travel sector,” said Preston.

“While there is no doubt that short breaks will be hit harder than in the boom years, interest rate cuts are starting to take effect and creating more discretionary income. In turn this is being pigeonholed for travel.

“The sun factor is alive. It seems holidaymakers are acclimatising to the recession and while they may be waiting for last minute deals, prioritising holiday spend remains on the agenda.”

He said consumer willingness to downgrade should offer the industry some hope, as people look forward to escaping the recession.

But he said due to the late cyclical nature of the travel market, its response to the recession will not be clear until the autumn.

On the domestic front, PwC believes inbound UK tourism will fall as the recession reaches more parts of the world, but this will be countered by the drop in value of the sterling and UK-domestics holidaying at home.

It said this trend is driven by family based holidays, as 45% more 35–54 year olds are saying they intend to stay in the UK than when asked the same question back in July of last year.
 

*See TravelMole Comment by Jeremy Skidmore.

By Bev Fearis