As every New Year approaches we can expect advertising focus to quickly switch away from festive gifts to summer holiday options. Of course things may be very different this year given the fundamental changes that have taken place in world economies recently and price is sure to be a major consideration when holiday choices are being made.
There are number of factors that will influence the holiday market next year, with the key drivers being the amount of money people are willing to spend, the impact of some very dramatic currency fluctuations recently, the dynamic oil price and of course the usual demand and availability levels.
Let’s take the first point, the one of consumer wealth and the amount of money available for holidays in people’s budgets. That is surely lower than in previous years, but will not necessarily mean that holidays will off the agenda next year. It normally means that very expensive holidays will suffer and lower priced alternatives will do better, in much the same way that the low cost supermarkets like Aldl, Netto and Lidl have experienced an upturn in fortunes at the expense of mainstream premium competitors. A similar trend is likely to be seen in the holiday market with low cost flight providers bound to experience higher demand as people look for ways of reducing travel costs. The other important factor here though is the loss of several low cost carriers due to the large spike in the price of oil during the second half of 2007. That spike drove the price of aviation fuel to new highs and, with it, caused the demise of several cheap flight operators. The price of oil has now has now fallen to very low levels but not without a lasting impact. Lowered margins and cash flow issues, brought to the fore by the tighter credit allowances provided by the banks, brought several flight providers to the brink of solvency and unfortunately some did not survive. Of course that has left a smaller spread of operators in what was a crowed market, which may of course mean fewer competitive pressures and higher prices in the long term.
Currency variations are yet another factor which are bound to cause dramatic effects in the holiday sector. Both the US dollar and the Euro are now much stronger currencies than they were a year ago and with the pound becoming weaker over the same period, holiday prices for UK residents travelling abroad are sure to increase significantly. However, with many package holidays being priced and bought by operators well in advance, increased prices may not be seen in travel brochures for a few months to come. But expect summer package holidays to European and US destinations to be more expensive that in recent years, causing many people to think again about the type of holiday the select and destination preferences.
The low cost flight marketplace has become smaller due to the demise of some smaller carriers, but the bigger names like EasyJet, RyanAir and BMI, together with operators who are affiliated with package holiday businesses like FlyThomasCook and Monarch have all used their financial strength to come through the recent difficulties and should be set fair to see better times in the future.
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