Wish you were here?

Downturn, what downturn? Britain's biggest two holiday companies, Thomas Cook and TUI, are booming. James Moore reports
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The Independent Online

Britain's big two travel companies are flying higher on the stockmarket than they ought to have any right to expect after a brutal recession followed by a recovery that is anaemic at best.

But punchy trading statements suggest these are two companies on which the sun is shining, and their shares have taken off. Over the year, both companies are strongly ahead, too – TUI by more than 31 per cent, Thomas Cook by a more modest (but still respectable) 10 per cent.

The news agenda of recent weeks might have been dominated by talk of future tax rises and economic uncertainty, but British consumers, it seems, are determined to take their summer holidays. And they want those holidays packaged, preferably by big companies that are bonded and insured up to their eyeballs and therefore stand little risk of leaving their customers stranded in exotic climes – a situation thousands found themselves in over the last year after booking with smaller operations or putting their own trips together, as the downturn forced smaller, weaker, travel operators to the wall.

"I think the reality is that conditions are recovering. Consumers are spending money. The stocks were pricing in concern that people wouldn't spend – so, naturally, positive news is being very well received," says Credit Suisse's travel and leisure analyst Tim Ramskill. Mr Ramskill notes that, notwithstanding the downturn and the pay freezes, short-time working and other measures that followed, many consumers actually have quite a bit of spare cash at the moment. The reason? Low interest rates which have kept mortgage payments down for anyone on a variable rate.

The end of recession – even if recovery has been weak – has also meant that people are feeling slightly more secure in their jobs – and are therefore much more willing to part with their spare cash than they were a year ago. Getting away from a cold and gloomy Britain is at the top of their list of priorities.

This analysis was borne out by Thomas Cook, which reported a 30 per cent rise in summer bookings over the past four weeks.

The company's chief executive, Manny Fontenla-Novoa, says: "I've been in the travel industry long enough to experience the way it has worked in previous recessions. And what you find is that a holiday is really important to people. We have found that pretty much the last thing people are willing to give up is their main summer holiday. People will cut back on white goods, electricals, going out, and clothing, before they will cut back on their holiday."

And, of course, holidays have become cheaper as the big firms have squeezed their suppliers on the grounds that 2010 would still not be the easiest of years. "We thought this year would be difficult," admits Mr Fontenla-Novoa. "So we pushed our suppliers to reduce costs so we could pass savings on. Holidays are very competitively priced. We have block purchasing power so we are able to do this. "

TUI reports a similarly upbeat picture. Peter Long, its chief executive, says: "We are very pleased with the level of demand we are seeing." Borrowing a phrase from Gordon Brown, he says TUI's customers tend to be "hard working families". He agrees that low interest rates have helped them, and notes that despite all the talk of tax rises, those families have not yet been hit. "They are feeling more secure about their jobs and their expenses. A lot of them have more money in their pockets than they have had for quite some time. There is more confidence and we feel good about the outlook." The big two are also helped by the security factor. Both companies make a point of stressing their financial strength and security. They don't make great play of it in their marketing, but the point is subtly rammed home.

Which Holidays says that the big companies don't score well compared with smaller outfits that can offer bespoke packages and personal service, but nor do they do badly.

And the organisation's head of research, Rochelle Turner, says that the security factor is something that many consumers say is important: "According to ABTA 82 per cent of consumers say that financial protection is important. It wouldn't surprise me if some people decide to go package this year because their money is protected. They will have seen the problems faced by some operators, and you also have issues such as the British Airways strike.

"Compared with companies where you can create your own trip and not just buy off the shelf, they don't compare favourably in terms of value and service and quality. But Thompson, for example, received 66 per cent approval for customer care, which isn't bad."

2010 : The hottest holiday destinations

Turkey is 2010's hot holiday destination, at least according to the big two holiday companies.

For a start, the pound goes much further compared with destinations in the Eurozone, such as Spain or Portugal, as the Turkish Lira is not the strongest of currencies.

However, holiday companies say there has been significant investment in infrastructure and a large number of new, purpose-built, well-run hotels have kept prices competitive. Thomas Cook says that all-inclusive holidays, which include all food and drink in the price, are also proving particularly strong sellers this year. People are more willing to spend money on travel than they were, the company argues, but the all-inclusive option, though criticised in some quarters, allows them to budget more easily.

Despite the robust performance that the package operators are showing, ABTA, in an overview of the decade, notes continuing rises in adventure holidays combined with a sharp growth in travel to Africa. It also says that modern consumers feel that they "want to put something back".

"Holidaymakers increasingly want to make sure they are helping others through their adventures. The term "chadventure" has been coined by gapyear.com – for those "embarking on adventure while raising money for charity". Another, rather more tortured, term that has gained currency is "voluntourism". ABTA says: "Tour operators are cottoning on to the desire to be philanthropic through travel and some are seeking tie-ups with non-governmental organisations."

Despite a decade marked by terrorism, war, SARS, tsunami, bird flu, swine flu and recession, Britons' appetite for travel remains undimmed.