In the last month the chief executives of the travel industry’s two largest operators have been singing from the same hymn sheet.
Thomas Cook’s Manny Fontenla-Novoa confirmed to the City that “the summer holiday is a must-have” and that his research reflects that holidays are the last thing people skimp on and they will just spend less when they get to wherever they are going.
TUI Travel’s Peter Long has also confirmed to the City that: “Demand for summer 2008 is strong – this confirms our research that the annual holiday is an important component of the family budget.”
Why so positive? First, they both have less to sell than last year due to capacity cuts. Second, they will have hedged their fuel and currency costs so remain good value.
Having hedged the euro, the big operators will offer better value than direct hoteliers and bed banks and, having hedged fuel, better value than the low-cost airlines.
Nevertheless, the two companies remain consumer facing and while their ‘research’ may suggest people will insist on taking their summer holidays, both will suffer with a recession.
In Mark Twain’s immortal words “there are lies, damned lies and statistics”. Let’s hope the market leaders are spot on and that the UK consumer wants to get away from it all irrespective of increasing cost and difficult circumstances.
Why would a consumer still want to go on holiday given the current state of the economy and the gloom that surrounds the credit crunch and rising prices? Answer: for the same reasons that the government’s poll results are so awful (hence the £120 tax gift knee-jerk).
When times get hard, people want change – to experience something fresh and different. Their problems do not go away but they will seem more manageable after a break from the mundane and the norm.
Are we in recession? I believe so, but others would argue that we are not. It is a unique and worrying situation in that prices are continuing to rise rather than fall in the manner one would expect in a recessionary cycle.
Afghan farmers are harvesting wheat instead of poppies as it is more profitable – the price of wheat having increased so substantially in the last year. India has all but stopped exporting rice. Who would ever have predicted such things last year?
Hellenic Voyages became the latest operator to fail last week, on top of two others the week before. Failures in May are very unusual and difficult to rationalise, and despite increasingly worrying trends there are reassuring noises from the City.
Oh, the vagaries of this wonderful industry! So difficult to predict, protect and pre-empt…