A tour operator has called the recession "soul destroying" and said it the worst trading conditions the industry has seen in nearly 30 years.
Classic Collection Holidays sells 80% of its holidays through travel agents and said weak demand through the trade was proving a "huge challenge" for all operators.
Managing director Nick Munday said: "I have been in tour operating for 27 years and I thought I had seen it all, but I have never seen it as tough as it is now to sell holidays.
"It's shaking the fabric of the industry. It's soul destroying. It's quite exhausting to minimise the damage in the short term."
Although Munday is confident his business will survive - describing Classic Collection Holidays as one of the most "blue chip independent companies" in the industry - he fears there could be more failures leading up to the ATOL renewal deadline at the end of March.
He predicted: "It will be a horrible watershed. It's questionable whether some operators are making any money."
For his own business, Munday said the downturn in demand means 10% more work for 10% less business.
Staff were having to work harder and companies are being forced to come up with more deal-led offers to convince consumers to book, he said.
By Christmas Eve, the company had taken 10,000 bookings for 2009 - nearly a third of its passenger numbers for this year. But since the start of the year bookings have been about 10% down.
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