Tour operators deny setting up 'cartel'

THE Office of Fair Trading is concerned that major tour operators may be employing restrictive practices in an attempt to end what one industry insider calls "kamikaze discounting".

The three market leaders - Thomson, Airtours and First Choice - have made an informal pact to launch their brochures for next year's summer season on September 1. Industry sources say holiday firms used the pages of the travel trade press to tell each other when their brochures would appear.

The OFT, which earlier this month re-launched an inquiry into the industry's alleged anti-competitive practices, is unhappy about not being formally told of the tour operators' unofficial understanding.

An OFT spokesman said: "What lies behind this is an attempt to stop discounting, which is not good news for customers. Maybe it should be registered under the Restrictive Trade Practices Act."

The holiday firms deny any collusion regarding the timing of brochure launches. "There were no actual discussions between the tour operators. There was no cartel," insists Nigel Henson, corporate communication director of First Choice, formerly the Owners Abroad group.

He rejects suggestions that the "gentleman's agreement" amounts to a restrictive practice. "Retailers should be allowed to sell holidays whenever they want. We didn't want to rack our products so early in the year."

Some brochures offering long-haul trips to Florida and cruises to the Caribbean are already available, but tour operators are nervously watching each other incase a rival jumps the gun by publishing their main summer sun brochures early.

Such a move could trigger another bout of hefty discounting in an industry already reeling from intense price competition and a trend towards later booking, problems exacerbated by Britain's long, hot summer which has caused many holidaymakers to stay at home.

Tour companies are keen to avoid the mistake they made last August when they rushed to get their brochures early.

Offers of free places for children encouraged some customers to book early and gave sales a brief boost, but the strategy soon backfired. Travel agents complained of being forced to sell three different sets of holidays - two summer and one winter - at the same time, while tour operators added more capacity to meet anticipated demand that was simply not there.

As a result, one million holidays remain unsold for the current summer season, which runs to October.

Confirmation of the miserable time the industry is having came last week when Airtours, Britain's second-largest tour operator agency, warned profits would fall by up to a quarter this year. Thomson, the Canadian-owned industry leader, also made noises about late bookings and lower heavy discounting. Latest figures show the average cost of a holiday abroad this year fell by 11 per cent to pounds 250.

Airtours plans to recoup most of this shortfall next year by introducing price increases of ten per cent while forecasting a reduction in the number of holidays available to nine million.

However, pressure to discount holidays is likely to continue given the depressed state of high street spending and low levels of consumer confidence.

The imminent launch of the new season's brochures comes as the Office of Fair Trading launches its second inquiry in a year into so-called "vertical integration". Its brief is to examine whether the links between tour operators and retailers are being made clear to customers when they are sold package deals.

Vertical integration involves tour operators owning their own retail travel agencies and charter airlines. This enables holiday firms to control product supply, delivery and distribution and has led to charges by smaller operators of "directional selling" where the larger holiday firms push their own package tours hard.

The three major firms control about 70 per cent of the overseas holiday market, the biggest being Thomson, which owns the largest travel agency, Lunn Poly, and the Britannia airline. Airtours runs Going Places and the Air 2000 charter group, while German-owned Thomas Cook has a 21 per cent in First Choice.