Judging by the beach scenes around the UK in the past few weeks, there’s no lack of demand for sun and sea this summer.
Spending part of this summer abroad, however, won’t be possible until at least July and meanwhile, the travel industry is working out how much it can charge for that annual break once the FCO ban and quarantine restrictions are lifted.
The consensus seems to be that in the immediate post-lockdown period, consumers will get some bargains to allay their anxieties but longer term, there may be a few factors to prompt price hikes.
A brief look online gives an idea of the current picture. On a number of its summer family packages, Tui is flagging claimed discounts well in excess of 20%.
One of its Platinum hotels in Ca’n Picafort, Majorca, is priced at £737pp for a week’s half-board from 31 July, a discount of almost £241pp. It’s not a desperate message, but it’s keen and the site promises any applicable further reduction will be added against the holiday’s launch price.
Kelly Cookes, Advantage Travel Partnership leisure director, said it was “really difficult” to get an accurate picture, as most of the consortium’s business was for the end of the year or next year.
However, she believes price will be key this summer: “We are all desperate to stimulate the market when the FCO ban and quarantine is lifted. That, coupled with the fact that the airport experience will be more challenging, means, I think, that pricing may need to be attractive.”
She added that summer pricing was already “slightly more attractive than it would usually be; it does seem designed to stimulate the market”.
Hays Travel managing director John Hays said during last week’s TTG seminar: "At the minute prices are really good and that’s helping with new sales.
"We all understand the laws of supply and demand and obviously if it all comes back with a big bang prices will go up. We don’t know at the minute about the future [though]."
Prestige Holidays’ commercial director David Skillicorn believes resumption of services by a key supplier – easyJet – will be significant.
“Someone will have to kick-start this market. My gut feeling is that easyJet will flood the market with very cheap seats just to test it. If people won’t buy them, then we’ve really got a problem, but after a couple of months it might do the trick and we will see travel coming back quicker than we ever dreamt of.”
He added that meanwhile “everyone is taking baby steps; you don’t know how people will feel about getting on an aircraft”.
Packaged foreign holidays generally rely on air travel and leisure air capacity had taken a huge battering even before Covid-19. The high-profile collapses of Monarch and Thomas Cook Airlines removed a major chunk, with the failure of Flybe and to a small extent, Flybmi making other dents.
Independent operators have, in the last few years, had to look to mainland Europe for their airlift, with Berlin’s Germania, before its collapse, providing capacity and Poland’s Enter Air still flying for UK operators. However, the majority of flying in the mainstream market is now in the hands of Tui, easyJet and Jet2.com.
The simple law of supply and demand means there are bumper years for consumers if the supply of air seats is too high, because they are then dumped as seat-only or paired with bargain basement accommodation to form cheap and (sometimes not so) cheerful packages.
Short seat supply
This summer, signs are that seat supply will be short. EasyJet will operate half its 1,022 routes in July and fewer than 75% in August, from all its UK bases. However, cuts in frequencies mean the July-September peak will see only 30% of the airline’s normal service operated, so anyone trying to dynamically package using the carrier could find their choice of seats and dates drastically reduced.
In a normal year, a 70% cut in peak capacity would provoke cries of anguish from tour operators and OTAs scrambling to find seats, but 2020 isn’t normal. Perhaps a 70% cut in peak flying will, in the short term at least, match demand, given that aircraft don’t lend themselves to social distancing, meaning the public may prefer a domestic break instead, but longer term, things might be different.
The reduced airlift is already leading hotels to flag offers to operators. “I think there will be some amazing hotel bargains,” said Skillicorn, citing already confirmed discounts of 30% throughout peak summer from one supplier. However, he added: “I think it needs to be more.”
He has concerns about later in the year: “It may well be that flights get extremely expensive 6-9 months later,” although he adds that his years of experience tell him “someone always comes along and puts more capacity in”.
This year, that someone might be Wizz Air, which has already announced a dozen new Mediterranean routes from Luton this summer and will be welcomed with open arms by any regional airport. Chief executive Jozsef Varadi hinted what is to come this week: “We are confident that we can ramp up operations quickly, re-stimulate demand with our ultra-low fares and contribute to the vital recovery of travel and tourism in our markets.”
Sunvil chair and Aito director Noel Josephides is another operator who believes the next few weeks will see some price messaging: “I think the big players and airlines will have to stimulate the market. It means that if we are buying in seats for tailor-made holidays, our clientele will benefit.”
On the downside, Josephides points to a potential price issue with charter flights, especially to places that have a shorter season, like the Greek islands. Charter flight pricing adds in the cost of the “empty leg” at the beginning and end of the season, spreading it among all passengers over, usually, seven months of summer. “If we don’t get going until August, we have a problem because we have to factor in the empty leg for just two months.”
Another potential factor, he said, was the cost of coach transfers if regulations only permit half the vehicle to be used.
We may see seesaw pricing like no other this summer, but initially, it will doubtless be cheap deals that make Brits shed any concerns about going abroad. Bargain breaks in resorts only able to operate at reduced capacity are appealing, on paper at least; but how different 2020 will be is still a mystery. The white-knuckle ride of the (hopefully) post-Covid summer begins soon.