Record season for Airtours as bookings take off

Airtours, the UK's second-largest tour operator, said yesterday that the holiday market was booming. Andrew Yates finds the strong economy, low unemployment and windfall payments from building societies are fuelling the surge in bookings.

Airtours 1998 summer holiday bookings are 15 per cent higher than last year. The group is also experiencing its busiest Christmas on record and overall winter bookings have risen 11 per cent, with the Canary Islands proving the most popular holiday spot.

David Crossland, Airtours' founder and chairman, said: "This growth is not just coming from windfall payments. The real driver is that people are feeling more secure about their employment."

Customers are also paying higher prices for holidays. "More people are trading up to higher quality accommodation. They are typically paying up to pounds 100 on top of the pounds 400 they would normally pay," said Mr Crossland. More holiday makers are booking early and paying brochure prices as the tour operators have cut the number of late package deals on offer. However, Airtours' summer holiday prices will fall next year by up to 5 per cent. The strength of the pound has enabled it to secure better deals with local hoteliers.

Long-haul destinations are becoming increasingly popular and Airtours predicted that Mexico would be the sought-after destination in 1998. The number of City breaks holidays sold also rose sharply. Strong demand meant Airtours decided in March to increase the number of breaks on offer to destinations such as Paris, Amsterdam and Rome.

However, last month's tourist massacre near Luxor has shattered the Egyptian holiday market and Airtours has decided to scrap cruising holidays to the country next month.

Mr Crossland said that Airtours had a war chest of pounds 250m for acquisitions. The group is committed to expanding its business in North America despite losing pounds 6.6m over there last year due to start-up losses in the US and problems in Canada. Airtours is also eyeing up more purchases in Europe, especially in Germany.

Airtours is also likely to invest in expanding its cruising operation by buying a new ship in the near future. The group has been encouraged by the rapid growth in the business which now carries 150,000 people a year from a standing start in 1995.

Airtours, together with US partner Carnival, recently bought Costa Crociere, the world's fourth-largest cruise line, and is planning to pump more money into this business.

Airtours' pre-tax profits were up 39 per cent to pounds 120m for the year to September. However, its shares slipped 32.5p to 1235p. Analysts were disappointed with the performance of its Scandinavian business. Scandinavians stayed at home to enjoy the hottest summer for 200 years, which meant holiday sales grew more slowly than expected.

Airtours does not expect to have to sell Going Places, its travel agents chain, as a result of a Monopolies and Mergers Commission investigation into links between tour operators and travel agents.