Travel industry braced for more cuts after First Choice cull

Internal links

Outlook

Thousands more jobs go in travel industry

First Choice became the UK's first holiday company to cut its workforce yesterday, slashing 1,100 jobs to offset a slump in demand since the 11 September terror attacks.

Around half of the jobs cuts will affect First Choice's British employees, with the balance falling across its European and Canadian operations.

The restructuring, in which 10 per cent of its staff will go, will save it around £20m a year. It will take a £9m hit for the costs of £10m that arose from the attacks, the company said.

The tour operator has cut capacity for this winter by 15 per cent and is poised to slash capacity for next summer by 20 per cent in response to forward bookings falling by nearly one third since 11 September. Bookings to Florida have suffered the worst, down by a half.

Airtours, a rival operator and UK's biggest tour group, took a similarly cautious view last month when it estimated the immediate impact on its business would be £10m and said it was committed to "at least 25 per cent less capacity" than this time last year. It warned that job losses among its 29,000 employees could follow.

Analysts commended the recent measures. Richard Finch at Williams de Broe said: "If they were done in good faith and sensibly and can maintain margins, then this needn't be the end of the world for UK tour operators."

First Choice shares gained 1.5p to 90p and Airtours closed up 3.75p at 153.75p.

The industry fears that a smaller, rogue player may tip the delicate high-margin, low-capacity balance achieved in recent years by slashing the cost of its holidays.

But the severity of the situation was highlighted yesterday by grim figures from Marriott, the US's biggest hotel company.

Marriott, which was the first hotel group to report results that included the period since 11 September, said revenue per available room – an industry yardstick – had tumbled by 49 per cent in the second half of September. It expects that revenue to decline by 25 to 35 per cent in the fourth quarter.

Marriott's negative outlook follows profits warnings last week from some of the world's largest hotel companies, including France's Accor, US-based Hilton Hotels and Six Continents, which owns Holiday Inn and Inter-Continental.

Separately, ebookers, the online travel agency, said it would shave between 10 and 20 per cent off its 700 staff as it embarked on a cost-reduction programme.