Holiday prices set to rise

Britain's biggest holiday firm warned today that the price of a summer holiday will rise next year as it bears the brunt of higher fuel and accommodation costs.

Thomson and First Choice owner TUI Travel said it will pass a 5% increase in the cost of providing a package holiday on to customers.

The news signals more pain for consumers who are already going abroad less as a result of the weaker pound and the squeeze in disposable incomes.

Average selling prices for next summer are up 10%, although this is partly because it has sold more specialised holidays, which tend to be more expensive.

TUI also shed more light on the decline in the UK holiday market, saying that bookings for next summer are down 11%.

TUI added that bookings for the later part of the summer season were down 7% since the end of July as consumer sentiment worsened in the UK.

Across the summer, the total number of UK customers going away with TUI was down 1%, while average selling prices were up 5%.

It was a similarly gloomy picture for winter bookings from the UK, which are down 11%.

TUI has reduced the number of winter holidays it sells, particularly to destinations in Egypt and Tunisia, which are still being hit after the uprisings in north Africa earlier this year. Average selling prices are up 6%.

For next summer, the group is reducing the number of holidays by 4%.

But despite the poor conditions in the UK, TUI said it is on track to meet the City's expectations for the year to the end of September.

It has benefited from an increase in late bookings in all of its markets apart from the UK, with profit margins in line with expectations.

PA