Package holiday firms face a lean summer: Increase in local prices hits bookings to popular destinations

THE PACKAGE holiday industry is set for another bruising summer following the confirmation that bookings to traditionally popular destinations such as Greece, Cyprus, Florida and France are substantially down on last year.

According to Thomson Holidays, Britain's biggest package company, bookings to Greece and Cyprus have been badly hit by local price rises which have increased rates by more than 10 per cent. The Thomson retail chain Lunn Poly reports that as a result, bookings to Cyprus have dropped by more than 40 per cent.

Florida has suffered from the fall in the value of the pound and recent publicity about violence against foreign tourists. However, operators have managed to dump unsold seats on to Hoover, which is keen to snap up capacity for its ill-fated free flights offer.

Specialists in holidays to France are reporting a slump in bookings of up to 40 per cent; they blame the devaluation of the pound and the continuing effects of the recession among the middle classes.

Despite these problems, Charles Newbold, the managing director of Thomson Holidays, said yesterday that he remained 'cautiously optimistic' about prospects for this summer. 'Bookings are running at about 3 per cent up on this time last year,' he said. The increase in bookings overall is largely the result of a price war among retail travel agencies in January. In travel insurance-related deals, the main retail chains were offering up to 10 per cent discounts as well as low deposits to early bookers. Comparisons with this time last year are also blurred by the 1992 general election, which depressed bookings substantially.

Despite the slight overall increase in business, it seems likely that there are well over three million unsold holidays still on the market for this summer - more than 40 per cent of the 7.5 million summer package holiday capacity.

While the big three operators, Thomson, Airtours and Owners Abroad, are holding their place in the market, the immediate future is more worrying for the hundreds of small specialist companies which concentrate on Greece, Cyprus and France.

Long-haul bookings have been badly affected, not only by recent violent crimes in Florida - which has a share of more than 50 per cent of the long-haul market - but also by the political problems and terrorist attacks in Egypt and Sri Lanka.

According to Lunn Poly, bad publicity about Kenya has caused the company's business to drop by more than 50 per cent.

This time last year, Thomson and its rivals embarked on a substantial price-cutting campaign, offering two week holidays from pounds 99 in an effort to dispose of surplus capacity. Seat-only specialists were forced to sell return flights to Greece and Spain from as little as pounds 39 in order to encourage bookings.

Mr Newbold said that he thought price cuts of this level were 'unlikely' this summer; however, there were already generous discounts on packages to Greece and Cyprus with discounts of up to 10 per cent on brochure prices.

So far this year there have already been several substantial bankruptcies, including Airlink and Medina Holidays, as the tight financial situation begins to bite. It seems certain that more failures are inevitable.

Under the EC Directive on Package Travel, which the Government enforced this year, all package travel organisers are obliged to provide protection to cover their customers in the event of financial failure. However, the Government failed to implement an effective means of policing the legislation; there are fears that there may be thousands of companies continuing to trade illegally without having a bond.