Wednesday, June 15, 2005

Consumer Holiday Spending On Target

FIRST Choice Holidays yesterday revealed it has seen no slowdown in consumer spending growth as it reported a narrower first-half loss and unveiled a big rise in summer bookings.Losses in the traditionally poor winter season were cut by 10% to £46m as First Choice reduced its exposure to many ski-ing destinations.

Meanwhile, sales of mainstream holidays are 11% ahead this summer, with specialist holidays 33% higher than a year earlier. Peter Long, chief executive, said a recent survey of 1000 First Choice customers found that 75% regarded their annual holiday as essential and not a luxury, and that 95% would not reduce their spending on their holidays.

That will ease investors' concerns following comments by Bank of England governor Mervyn King, who earlier this week said: "The weakness in sales of goods on the high street from clothes to cars has been marked."First Choice has been trying to encourage holidaymakers to book more upmarket breaks instead of what Long called the "commoditised market of generic two and three-star holidays in Spain and Portugal where there is no differentiation between you and the next operator".

Traditional tour companies have seen their sales dented by the ascendancy of no-frills airlines such as easyJet and Ryanair, which have poached short-haul travellers. In response, First Choice has focused on medium-haul to Turkey, Tunisia, Morocco and Egypt, as well as long-haul flights to the Dominican Republic and Florida. It has repackaged short-haul routes such as Majorca as luxury, but traditional destinations such as the Costa del Sol now represent just a third of the business.

However, Long said the trend did not mean the death of the typical Spanish package holiday. He said that for the first time in the travel industry, supply and demand was broadly balanced, meaning holiday companies are not having to slash their prices to sell unwanted trips. First Choice has also seen a growth in the number of customers choosing and booking their holidays online. Following the rise of rivals such as lastminute and ebookers, the company said online sales were running at 22%, with 25% expected to be hit this summer. Long said he could easily see 40% of First Choice's business being done over the internet before long.


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