Airtours turns cool on summer holiday sales

A tale of two economies: Industry makes gains overseas but the consumer sector stays depressed
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Airtours, the UK's second largest tour operator, yesterday warned that the industry had been too optimistic in forecasting growth of 5 per cent in sales of this summer's overseas holidays. The company said the industry would at best achieve growth of 1 per cent, and there was also a chance that sales may fall 1 per cent.

Almost a quarter of this summer's 10 million overseas package holidays remain unsold. While there are few signs of heavy discounting, tour operators will almost certainly have to again dump packages at knock-down prices with the high season only six weeks away.

Besides being incorrect about this year's growth, the industry has yet to provide a solution to overcome the growing consumer habit of booking holidays late in anticipation of bargains.

This problem is not so much a child of recession, but a protracted consequence of the mid-1980s battle among tour operators for market share. At the height of that three-year price war, consumers lapped up fortnight holidays in Spain for less than pounds 100.

The casualty list was long, and included some well-known names. International Leisure Group, headed by Harry Goodman, went under and Thomson, the market leader, snapped up the distressed Horizon group.

Leisure analysts now believe the pain will be mostly felt by the hundreds of independent travel agents and thousands of small tour operators already finding it difficult to compete against the financial might of market leaders. Airtours, Thomson and First Choice hold sway over almost 70 per cent of the packaged holiday market.

Signs that the industry's forecasts were going to be missed first surfaced during the peak selling season in January. Hugh Collinson, managing director of Airtours, said yesterday: "January was disappointing. February was also slow."

He added: "There was a view that capacity would be up 5 per cent, but we just don't see that anymore. June has not been good, and we think that will move into the first couple of weeks of July." The industry, according to analysts, will have to come to terms with reducing capacity.

Despite the stagnation in the package holiday market, Airtours has managed to increase its market share. Its half-year results to 31 March, which produced an expected increase in the seasonal loss from pounds 17.6m to pounds 34.9m, showed the company's share of the summer market rising from 20.2 to 21.3 per cent.

Investment Column, page 22