In just a few short weeks, travel businesses have gone from converting unbridled post-Covid travel demand to worrying they might not be able to afford to keep the lights on this winter.

It all started so well too – despite record UK temperatures this summer, demand for foreign travel soared as two years of pent-up demand was unleashed.

Last week, Tui Group said summer sales from the UK were 4% ahead of 2019 levels. Winter bookings are up 9%, with selling prices up 22%. As of mid-September, Tui had sold 91% of its summer programme compared to 2019 levels, with bookings for July and August at 94%.

EasyJet, similarly upbeat, flew 87% of its 2019 capacity in April, May and June, with flights 88% full and passengers each spending £22 on extras – 55% more than they did pre-pandemic.

When the airline’s peak summer figures are revealed, the figures will – despite the disruption at airports this summer – be similarly positive.

So far, so good. But on the face of it, and as the nights draw in, there are undoubtedly many legitimate reasons for worry this winter.

Understandably, the energy crisis is foremost in most consumers’ minds, and a concern for businesses; even with the government intervention, bills have already soared.

However, the government has said it will review its support this winter, and it’s a fair bet it will take only take a few media stories of hardship or, heaven forbid, something worse before more help is given – no prime minister will want to be associated with people dying of cold.

Currency is another issue that could dampen travel demand, with the pound currently at its lowest level against the dollar since the 1980s. This could affect dollar-based destinations and, further down the line, will push up the cost of holiday elements purchased in dollars, such as aviation fuel and some hotel allocations.

Sterling’s value against the euro is also no cause for celebration, currently around €1.12. But if you look back exactly five years ago, what was the rate? €1.14. In fact, the pound has hovered around this level since then, and that hasn’t put people off travelling.

Currency hedging means operators and airlines will be able to delay most of the impact of falling sterling for a good while yet, but for any consumers concerned about costs in their destination, there is a simple way to swerve poor exchange rates; travel to countries that are not dollar or euro-based – and there are plenty of those.

Feeling the squeeze

Interest rate rises are flagged as another cause for concern, with the Bank of England rate now at 2.25%. This pushes up the cost of borrowing and mortgages. But part of the concern about rising rates is because they have been so abnormally low for so long. Look back a decade and you can see the dizzy heights of 3%, 4%, 5% or even 6% being the norm between 2000 and 2008.

Most people who have mortgages fix them and so are not immediately affected by rate rises, although there are some shocks in store for those remortgaging after being on a fixed rate. This will have a big effect on disposable incomes further down the line. One bonus, though, is that if you have savings, higher interest rates are your friend.

Then there is the war in Ukraine to think about. Very few agents have so far told TTG it has been an issue when clients come to book and, barring a major escalation, it will hopefully stay that way.

All the adjustments to airline schedules and flying patterns have already been made, with some longer journeys to avoid Ukrainian and Russian airspace necessary, but otherwise the impact on travel has been to free up some properties that would otherwise have taken Russian guests.

For UK travellers, high demand for holidays coupled with capacity issues have seen, as Tui pointed out, higher selling prices. TTG’s latest Travel Agent Tracker report found price increases to be agents’ biggest concern in August, with 65% of agents mentioning it, a rise of 21 percentage points on the previous month.

A majority of agents were also discounting only very occasionally or not at all, with one almost complaining: “People don’t realise the level of demand there is out there.”

There are signs this situation may be resolved as we head into the winter just as people become more budget-conscious. This year has seen capacity restrained not just by airlines holding back, but also by rebookings from the past two years.

The latter will be less of an issue as we go into 2023, so perhaps prices will fall and cash-strapped consumers who want to forget about the UK’s economic woes will see travel shift back within their reach again.

That’s assuming, of course, Covid does not reappear and that the post-pandemic drive for sustainability does not persuade consumers to stay at home, but the signs are neither of these issues are deterring bookings.

Fingers crossed?

The signals from the number crunchers, nevertheless, appear concerning. The Institute for Fiscal Studies estimates median earners will be £500 worse off this year.

Bank of England data showed the economy shrank by 0.1% in the three months to June, with economists estimating the same tiny dip was experienced in the past quarter. That technically means we are in recession, but did you notice this? And did your clients? Not that we can see so far, but look out later on.

So are things really that bad? Not currently – and fingers crossed it stays that way. A lot depends on what Liz Truss does in the coming days – or what the Bank of England does if she does nothing.

Virgin Atlantic chief executive Shai Weiss this week said he wanted to give a “pretty clear” message to the government: “Maybe they need to take more difficult decisions to reverse the decline of the pound to ensure this country is not left with perceived weakness in international markets," he remarked.

“Sometimes, all of us should be humble enough to say that if I did something that is not working, maybe I should be humble enough to change course,” he said.

Weiss, however, remains optimistic, adding that “maybe” the energy bill cap and cuts to taxes and National Insurance mean UK consumers continue to take their “sacred” holidays and visit loved ones.

While things aren’t too bad at the moment, all the signs are that the post-pandemic bounce for the travel industry could otherwise be short-lived. Let’s hope something changes.