The price of package holidays will have to go up next year, according to a travel trends report out today.
The average price of holidays in summer 2009 rose £26 to £564, the report from travel trade publication TTG said.
Next year there were several "potential rocks lying in wait for the travel industry", warned the report which was released in Barcelona at the annual convention of UK travel organisation Abta.
The report went on: "Seasoned industry observers believe the industry simply cannot sustain its current size. Prices will have to go up even as demand slackens, and weaker firms will go to the wall."
Overall, the summer 2009 leisure travel market was down 11 per cent, with the likelihood that summer 2010 bookings will be affected by soccer fans being glued to the TV watching England compete in the World Cup in South Africa.
For summer 2009, with travel companies concentrating their cut-backs on cheaper holidays, there was a 30 per cent fall in the number of holidays in the £200 to £399 price range.
Sales of packages costing between £800 and £1,799 grew by 6 per cent and there was a 5 per cent rise in accommodation-only bookings.
There was also a rise in the number of all-inclusive holidays and a decline in self-catering breaks.
The report said: "The general picture seems to be customers are bargaining harder than ever, waiting later than ever to book and demanding more value for money.
"Despite this, tighter capacity means an expected late price war failed to materialise. There have reports of customers walking into travel agencies expecting to have their choice of late bargains only to find that they unable to book what they were looking for at the price they were hoping to pay."
The report revealed that the number of Britons taking holidays in Spain last summer dipped 13 per cent, with Canary Islands' breaks falling 22 per cent. However, Spain still remained the favourite holiday destination for Britons.
It was also revealed that airlines using UK airport were now operating 16.5 million fewer seats than they did in 2004.
In contrast, the UK low-fare airlines such as Ryanair and easyJet have increased capacity by 52 per cent since 2004, despite a 5.7 per cent reduction in 2009.