Blow for travellers as TUI to put up cost of holidays

Britain’s biggest holiday firm warned yesterday that the price of a summer holiday will rise next year as it bears the brunt of higher fuel and accommodation costs.

Thomson and First Choice owner TUI Travel said it will pass a 5 per cent increase in the cost of providing a package holiday on to customers.

The news signals more pain for consumers who are already going abroad less as a result of the weaker pound and the squeeze in disposable incomes.

Average selling prices for next summer are up 10 per cent, although this is partly because it has sold more specialised holidays, which tend to be more expensive.

TUI also shed more light on the decline in the UK holiday market, saying that bookings for next summer are down 11 per cent.

TUI added that bookings for the later part of the summer season were down 7 per cent since the end of July as consumer sentiment worsened in the UK.

Across the summer, the total number of UK customers going away with TUI was down 1 per cent, while average selling prices were up 5 per cent.

It was a similarly gloomy picture for winter bookings from the UK, which are down 11 per cent.

TUI has reduced the number of winter holidays it sells, particularly to destinations in Egypt and Tunisia, which are still being hit after the uprisings in north Africa earlier this year. Average selling prices are up 6 per cent.

For next summer, the group is reducing the number of holidays by 4 per cent.

But despite the poor conditions in the UK, TUI said it is on track to meet the City’s expectations for the year to the end of September.

It has benefited from an increase in late bookings in all of its markets apart from the UK, with profit margins in line with expectations.

TUI has proved relatively resilient in recent years despite the pressures on the holiday market. It has benefited from demand for its exclusive packages, shorter breaks and all-inclusive deals, which include meals and are seen as being better value.

Wyn Ellis, an analyst at Numis, said the update was “reassuring with regards to short-term trading” but there are “a number of reasons to be concerned” about next year, including the hike in UK prices, slowdown in the global economy and the slow recovery of holiday markets in North Africa.

He expects underlying profits to rise 5 per cent to £468m in the current year.