Bright summer ahead for holidaymakers
The punter will benefit from low-cost travel this Summer. By Eoghan Corry
W e can all look forward to the smell of a summer barbecue this year, made especially delicious by the knowledge that it is the holiday companies who are being barbecued.
Big tour operators, the people who run the travel industry in Ireland and effectively decide where we go, say they have just enough capacity to look after our holiday needs in 2008.
That means they get high prices for their airline seats and hotel beds, make a decent profit, bank the cash and live happily until the winter sun season comes round. That's how they calculate it. The risks are high. If they get the sums wrong they get burnt. It is annual ritual and one that has taken place for decades.
Nobody can tell what is going to happen next until mid-May, when we get the first signs of how the market is behaving. Somebody might panic, and sell off holidays in a prime location for €200. That means everyone else has to drop their prices.
An external factor, a natural disaster, food poisoning in a seaside town, cold temperatures, fuel prices, a bombing in a major resort, airline turbulence or a currency crisis, might send holiday makers in a particular direction. Even a soccer fixture can change our holiday experience. Sometimes there is no explanation. Croatia goes out of fashion and Bulgaria comes in. The holiday business is like that.
There are three reasons why it looks like it will be a good season for the punter, and a bad year for the holiday company.
The first reason is to do with turmoil in the aviation business. Ryanair and Aer Lingus have come to lunch in the beach destinations that Irish holiday makers love. Airports like Malaga, Alicante, Faro and Palma are filled nowadays, not just with the charter airlines, but with Ryanair and Aer Lingus planes carrying independent holiday makers.
The advent of Open Skies, and how it will affect the profitability of Aer Lingus' cash-cow transatlantic business, the price of oil and the “perfect storm” for aviation predicted by Michael O'Leary of Ryanair, will mean that airlines will be tempted to concentrate more firepower on those warm water routes.
Any summer destination that is delivering substantial holiday business to the tour operators is now seen as fair game for our two major airlines, with Aer Arann, newly supplied with jet aircraft, not far behind.
Among Aer Lingus's new routes out of Dublin this year is a twice weekly service to Bourgas. Among Ryanair's is a service to Palma.
The wily traveller will pick a destination with more than two carriers, and play the charter service against the scheduled carrier to get the best price.
Remember, a scheduled low cost carrier offers the best prices to those who book early. A charter airline, when capacity exceeds demand, will offer late specials to those who book late.
The second is because of a change in how the travel industry works. Twenty years ago the tour operators bought beds and plane seats in bulk controlling when and where we went on holiday.
When they decided that Majorca rather than Ibiza should be our Balearic island of choice, we had no option but to follow them.
Nowadays the three tour operators who control more than 70 per cent of the Irish market still use their buying power to offer low price holidays. About seventy travel agents have used the new freedom they enjoy to cut out the middle man and offer cut price holidays of their own.
Holiday companies are putting people on scheduled carriers to places that charter airlines would never venture. Italy, abandoned by he big tour operators in the early 1980s, has opened up to a new generation of holiday maker.
Long haul options in the Caribbean have increased massively, driven by the weakness of the dollar and the opening up of flight options through Gatwick, Philadelphia and Atlanta.
The tour operators who have decided to hold capacity at 2007 levels for the 2008 summer season are facing increasing competition in a market place that is changing and becoming more complex by the month.
Traffic through Dublin airport is already 7 per cent up on last year. Dublin airport got 42 new routes in 2007, and 51 in 2006. So far we know of 19 in 2008.
More choice means it is less likely all those planes to Santa Ponsa, Puerto del Carmen, Playa del Ingles, Praia da Rocha and Torremolinos will be filled.
The third reason it will be a good season is meteorological. Last summer was the second wettest on record in Dublin, where the oldest records are kept, beaten only by dismal 1958. The result was that obvious over capacity in the market had no impact. With each Monday the rush to the sun gathered pace.
Tour operators sold packages at full price and have entered 2008 in the hope that they can do so again. If the rains don't come, tour operators will have to cope with a double whammy, this year's decline in capacity and the delayed effect of last year's.
If you count the absence of SSIA money it might even by a treble. When the barbecue begins the smell of burning profit margins will be welcomed by the bargain hunter. Happy holidays.