Margins in family market tipped to feel pinch in 2018

Margins in family market tipped to feel pinch in 2018

The outlook for the year is positive, say industry leaders, but the mainstream market could be ‘a battleground’. Ian Taylor reports

Margins may be squeezed in the mainstream family market in coming months, leading industry figures have warned.

Abta chief executive Mark Tanzer reported members’ annual turnover at a record high of £37 billion, but told a Travel Weekly Business Breakfast at the end of last year: “You can’t just look at the top line. There has been a squeeze on margins.”

He said 2017 had proved “better than I imagined”, but added: “At a certain point you have to recognise there is going to be a change, that different segments [of the market] will move in different ways and the industry needs to adapt.”

Tanzer was speaking at the launch of the Travel Weekly Insight Report 2017-18 at the Deloitte head office in London.

Alistair Pritchard, Deloitte UK lead partner for travel, insisted: “The outlook is positive. Everything in the research [for the report] suggests people will go on holiday, but they are starting to change habits.

“The proportion [of UK consumers] planning a seven-night overseas holiday in 2018 has risen four points year on year, while demand for 14 nights is down. We see growth in appetite for two and three-star hotels and continued demand for all-inclusive holidays in the lower-income bracket.

“The fall in sterling is clearly driving up costs, and there is a perception that people want to go to a safe destination. That will push up prices. But demand overall should hold up as consumers prioritise spending on holidays.”

Tanzer said: “The suggestion that people are taking shorter holidays in two and three‑star hotels is a sign of wealth being lower. It’s a sign of how much people have to spend on holidays in the long term.

“There are segments powering ahead where people have disposable income – you can see margins holding up there – and others where it’s going to be tough, where it’s going to be a volume game.”

Miles Morgan, managing director of agency chain Miles Morgan Travel, reported “a record year” in 2017 and said: “The report confirms that our market, ABC1s and 55-plus, is a winning sector to be in.

“Cruise is particularly buoyant at the moment.”

But he said: “Some other sectors, particularly the family market, will be squeezed.

“The economy is slowing, interest rates are going up, Brexit concerns will start to crystallise. It doesn’t take a rocket scientist to work out all-inclusive will become more popular because people need to budget.

“The battleground for easyJet, Jet2 and Thomas Cook is going to become challenging. Margins will come under pressure if these guys keep increasing capacity.”

Helen Caron, Tui UK and Ireland distribution and cruise director, said: “We see strong demand for all-inclusive, for cruise [and] for differentiated hotels. We are looking forward to a strong January.”

Sophie Dekkers, easyJet UK country director, added: “Forward bookings for us are up year on year, given that Ryanair and Monarch capacity has come out of the market.”

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