Price Sensitivity to Stay in Travel in 2011

Demand will be high for specialist operators, but at the lower end competition will be tough.

The chairman of the Association of Independent Tour Operators, Derek Moore, says that the polarisation of travel currently underway will intensify in 2011. Citing conversations he has had within the industry, he says that high-value holidays sold to wealthy clients will continue to sell well, as “the rich will always remain rich and want to travel” – on the kind of complicated holidays that only specialist operators know how to package.

However, at the lower end of the market, the squeeze on family incomes will compel more people to turn to the internet to buy simpler, cheaper holidays. Price-sensitivity means that clients will carefully pick and choose between agencies and operators before deciding who to give their money to. “Travellers with lower budgets are much more price-sensitive and there is likely to be a considerable element of horse-trading before people make a decision on which company they travel with.

The top end is not quite so price-led but demands quality, service, expertise, and is prepared to pay for it. Operators and agents who can satisfy and maintain premium clients can look forward to a promising 2011,” he said. Next year should be a better year for the outbound travel business than the previous two years, Moore adds, but that depends partly on the “big two” operators, Thomas Cook and TUI. “If the big two travel companies keep capacity down then margins could be reasonable, but their history in this respect is not good,” he concludes.