Holiday prices are on the up and up

Oct 7 2008 by Our Correspondent, Huddersfield Daily Examiner

These are turbulent times in the travel market says Prof COLIN BAMFORD, head of the Department of Logistics and Hospitality Management and Associate Dean of the School of Applied Sciences at Huddersfield University

‘One way round this problem is to go to Egypt or Turkey, both of which are experiencing an increase in winter bookings’

IN my last Expert Verdict on August 19 I strongly encouraged readers to take a holiday before the end of the school holidays.

This was not only to get away from our diabolical summer weather but to go off before next summer, as there was growing evidence that holiday prices in 2009 would increase well above the rate of inflation.

The last six weeks have been bad for business and the economy as a whole.

The economy appears to be in freefall. The global financial crisis will hit many families hard; people will have less cash available and the annual holiday is likely to suffer.

To make matters worse the pound is at it lowest level ever against the euro, meaning that holidays to eurozone countries will be even more expensive next year.

We have also seen the collapse of more than 20 tour operators and airlines, adding to the meltdown and uncertainty.

Thomas Cook, the UK’s second- largest travel company, has warned of price rises of at least 8% next year.

The company gives two main reasons. They are:

The price of crude oil, which peaked in June at $147 a barrel. More recently the price has fallen to $100 but has now increased again.

Most large established companies like Thomas Cook have been able to hedge fuel prices by taking the precaution of buying supplies ahead of their use.

Not so for fledgling airlines such as Silverjet, EuroManx, Zoom, Maxjet, EOS and Oasis Hong Kong, all of which have gone out of business because they are having to pay more for aviation fuel than their competitors.

The weak pound against the dollar. About a year ago there were $2.1 to a pound; last week the exchange rate was $1.76, a depreciation of 16%. At the same time the strong euro against the pound has added further turmoil to the market.

Since the end of last year the pound has lost about 15% of its value against the euro. This means that holidays to France, Spain Italy, Greece and other eurozone countries are now much more expensive.

The same is also true for holidays to the US and other countries where the currency is pegged to the dollar.

One way round this problem is to go to Egypt or Turkey, both of which are experiencing an increase in winter holiday bookings. You are also guaranteed sunshine, particularly in Egypt, although with inflation rates of 30% last year any price advantages are likely to be short lived.

A recent Post Office survey indicated that the holiday pound went furthest in Malaysia and Thailand. But the long flight and the high level of surcharges have to be taken into account.

Market instability has increased through the dramatic collapse of the XL Leisure Group, our third- largest travel company, which also had it own airline. The reasons given above, plus the need to service a huge debt, led to its downfall.

With less market supply available next summer and with TUI Travel and Thomas Cook also cutting back on supply it is hardly Nobel Prize-winning economics to state that prices will inevitably rise even higher than previously anticipated.

All this seems to contradict the present set of price cuts being promoted by British Airways, other large scheduled carriers and low-cost carriers such as Ryanair.

Why, if costs are rising, are these and other companies slashing prices? The answer, quite simply, is one of over-capacity over the next few months, traditionally a slack time in the travel business.

Ryanair, for example, has 3m seats available for just £5 one way for travel over the next two months. BA, Virgin Atlantic, Lufthansa and Swiss International, for example, have slashed up to 40% off some long-haul flights for travel this autumn through to early next year.

Surely an opportunity to visit long- lost relatives in Australia?

Unfortunately not everyone can rush out and buy these bargains, particularly families with children still at school.

Even if you can let me give a word of warning. Cheap air tickets are invariably non-transferable and non-refundable. Once the airline has your money if you cannot travel you will not get a refund unless it is for a valid reason covered by insurance.

Finally, if you book with a low-cost airline such as Ryanair, easy Jet, Jet2.com and others, that cheap weekend break may actually cost a lot more than you might have expected. This is because of all the extra charges that are added to the basic fare.

Ryanair, for example, charges £8 for the first bag and £16 for the second bag checked in online each way. This charge is £16 for each bag checked in at the airport.

They also charge a further £8 for a personal airport check in and another £8 for payment by debit/credit card. Ryanair also have the lowest baggage allowance (15 kilograms) and will charge you the most if you exceed it!

Reserving seats and priority boarding may also clock up further charges. All of this means that the late autumn break to Barcelona will cost a lot more than you first thought.

Yet, with all the doom and gloom of the past few weeks, why not jet off to this recent European City of Culture while you can afford to and while there are plenty of flights still available?

Failing that, there’s always the train to Liverpool!