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Travel operators deny panic is fuelling cut-price deals

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Dec 10, 2007

(TVLW) - Starved Scots are being tempted by a glut of cheap last-minute winter holidays but travel operators deny they are trying to squeeze the last pennies out of consumers whose confidence has been hit by the credit squeeze.

The sales drive is being led by TUI Travel, formed by the Anglo-German merger of First Choice with the owners of Thomson Travel, which is offering deals for those ready to fly from Glasgow airport in the run up to Christmas.

Rival Thomas Cook and other tour operators have similar offerings although a spokesman for the Association of British Travel Agents was quick to deny that the deals smack of desperation at time of general belt-tightening.

"There may be a few isolated disappointing areas, but the tour industry is in better shape than for some time," he said. "Our own research shows that winter bookings are up around 10% on last year and it is a similar story for bookings already received for this summer.

"At present we are forecasting that total UK packaged holiday sales will be unchanged at 19 million this year, although we could well revise that figure in the future."

Others maintain that recent high demand is too good to last and that there could be further bargains on offer over the summer when the travel industry could suffer, along with other consumer areas, as a result of the continuing credit squeeze.

The first real evidence of the state of the market is due on Tuesday when TUI is due to deliver its maiden pro-forma annual figures following the merger.

Analysts expect annualised combined pre-tax profits to show a dip from £318m to around the £255m mark mostly due to the integration following the merger, but they predict that chief executive Peter Long will confirm a double-digit rise in recent demand despite a decision to cut capacity by around 12%.

The figures are expected to show particularly good bookings for luxury holidays in Far East locations together with seat-only flights as the group further lessens its dependence on Spain and other mass-market destinations.

Analysts at Investec believe this could provide scope for further rationalisation and that directors will squeeze £150m savings from the merger rather than a forecast £100m, helping profits to climb to more than £321m in the current year. There is also speculation that the group could save more cash by merging its German aircraft operations with those of low-cost carrier Germanwings.

Despite the encouraging forecasts, TUI has been a major disappointment to investors, with shares falling from a flotation price of 302p to present levels of around 270p since it made its stock market debut in September.

"TUI and Thomas Cook may have about 85% of the traditional packaged holidays market between them but they need to do more than cut capacity to cope with the changes in the marketplace," commented one observer.

"Increasingly, people book their hotels and flights through separate internet operators while the purchase of overseas holiday homes is taking millions of people out of the equation. At least 500,000 people now own homes in Spain, and many of them let their places out to friends and family as well as those who offer them for commercial holiday lets.

"The big operators may be disappointed with margins of as little as 2% or 3% on their cheap European holidays but they will find it difficult to force through price increases in the present climate.

"Long-haul destinations are a more attractive proposition, but they are a big ticket proposition for many and could fall foul of any further belt-tightening by consumers as the year progresses."

sundayherald.com

Travel operators deny panic is fuelling cut-price deals



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