Report suggests package demand is down

9th Nov 2007

Greater demand for customised holidays, activity-based holidays, long-haul
destinations, city breaks and cruises are eating into demand for the
traditional package holiday according to a new report from Euler Hermes UK.

The latest Euler Hermes report - entitled ‘Package Holidays - all wrapped
up?’ - suggests that whilst there were more than 18.8 million package
holidays taken in 2006, the proportion of such holidays compared to more
personalised adventures is declining at speed. Greater price transparency
in the market, prompted by new business models and innovations in
technology, has significantly increased competition.

Consumers have enjoyed the ride and will continue to do so as the market
evolves, according to the report’s author, Emma Holland, Senior Credit
Analyst at Euler Hermes UK:  “In the short term, the boundaries between
High Street retailers, online agents and tour operators are expected to
become increasingly blurred. More and more travel agents - and consumers
themselves - are expected to move into the online arena and piece together
their own packages in direct competition with the traditional tour


Emma Holland continued, “To make sure their own journeys are not cut short,
tour operators and travel agents must focus on providing unique offerings
to ever more adventurous, discerning and demanding holidaymakers.
Successful players will be those who differentiate their customer base and
target them appropriately.”



The report also signals a note of caution in relation to proposed changes
next year to ATOL (Air Travel Organiser’s Licence) bonding, and the rules
that state that any company that currently sells a package must be bonded
by a DTI-approved body such as Euler Hermes UK’s sister business, Euler
Hermes Guarantee.


As Emma explained: “The proposal is to replace ATOL bonding from April 2008
with a £1 levy on each booking, called an ATOL Protection Contribution
(ATC). Whereas tour operators have welcomed the change, the bonding and
insurance industries are concerned that failures may be more frequent
without adequate financial vetting and monitoring. We predict more
peak-season failures with the levy system as the banks will have little
incentive to keep companies afloat if they have no exposure to bonding and
can simply pick the most favourable time to cancel facilities.”


“It is also questionable whether the £1 levy will be sufficient to top up
the Air Travel Trust Fund (ATTF), which is still £21 million in the red due
to a large number of large failures including Laker Airways going back 25


“Customers booking lower-priced holidays will therefore pay proportionately
more levy than those on luxury or longer haul breaks.”


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