Holidays now an 'essential' spend for consumers

First Choice insisted yesterday it was protected from the consumer slowdown because three in four of its customers regarded their summer break as an "essential".

First Choice insisted yesterday it was protected from the consumer slowdown because three in four of its customers regarded their summer break as an "essential".

The tour operator, which has turned its back on traditional "sun 'n' sand" packages in favour of more upmarket long-haul trips, said there were "no signs" that the spending squeeze was hitting its business.

Peter Long, the chief executive, said: "The softening in demand is not impacting our customers' desire to take their main overseas summer holiday."

A survey of 1,000 First Choice customers found that 75 per cent viewed their main holiday as "an essential not a luxury", while 90 per cent of those questioned said they would not opt for a cheaper holiday even if forced to cut back.

Mr Long's comments came as the group surprised the market with seasonal interim losses that were lower than expected. He said the group was well placed for the peak season, with 15 per cent fewer holidays left to sell than this time last year.

For the first time in seven years "supply and demand within the industry is broadly balanced" he said, adding: "Our competitors are more focused on building return for shareholders than just grabbing shares."

In the past, companies such as MyTravel used to flood the market with package holidays only to be forced to slash prices when they were left with a glut of unwanted trips to the likes of Benidorm. "MyTravel is running its business with a view to building profit for shareholders so it made a decision to reduce capacity," Mr Long said.

First Choice's decision to build up its specialist holidays division, which offers trips to South America, and its activities arm, which caters for the more adventurous traveller, has helped narrow its winter losses.

In the six months to 30 April, pre-tax losses were 10 per cent better at £45.9m. Yesterday it ruled out returning any surplus cash to shareholders "for the foreseeable future".