Thomas Cook predict price increase for holidays next summer

UK tour specialist Thomas Cook is projecting that the price British travellers will pay for their holidays next summer will increase by 7%, largely due to increasing oil prices and the weak position of the pound to the euro.

Manny Fontenla-Novoa, the group’s chief executive, reported that summer holiday packages for 2009 were already reflecting these price rises, and that his expectation is for 2009 prices to remain 7% above last year, on average.

Fontenla-Novoa is blaming high jet fuel costs for increased airfares, but is also indicating that the higher costs of accommodation in the Eurozone reflect a weakened pound. Thomas Cook accommodation costs normally run at four times their fuel costs.

Discretionary money for holiday spending in 2009 is likely to be hit by the euro’s strength, and next year is likely to see a significant drop in overseas holiday travel. Other forces are also having an impact on the market, such as the rapidly disappearing disposable income of UK consumers, increased unemployment and rising inflation on essentials, including fuel and food.

Thomas Cook has plans to reduce its capacity in the summer of 2009 by about 5%.

“For the first time in a long time supply is maybe less than demand,” Fontenla-Novoa noted. In recent years, the travel industry has struggled to maintain its market as it lost business to some of the new low-cost airlines, and yet failed to cut its capacity in response to market realities.

He added: “I’m delighted with our performance over the winter and we are in a very good position for the summer season. I remain confident that we will achieve our goals for this year. For the longer term, our strategy is on track, our merger synergies are coming through, and we continue to target £480m of operating profit in 2009/10.”

www.thomascook.com