The race to the top? Why margins are really set to matter this summer
Gary NoakesThe clocks have changed and airlines and tour operators have switched into the summer season, with high hopes of another good bookings harvest.
But while summer 2022 saw operators reap good sales as post-pandemic demand overrode deterrents such as lengthy airport queues, is that same consumer need there again for summer 2023?
Reading the runes so far, the story is one of continued confidence despite cost of living and inflation pressures. Tui said in February its summer 2023 prices were a whopping 25% above those of 2019.
If this is indicative of the industry, then so far, so good, although fresh data from PwC suggests operator margins may not be rising quite as quickly as prices. And the question is whether consumers will continue to pay these high prices as the season progresses.
Nevertheless, confidence seems boundless among some. Jet2holidays took a giant leap in March, increasing its Atol by another 500,000 package seats, although not all of this will likely be used – and certainly not all this summer. In September, Jet2 said summer 2023 seat capacity was already 20% higher than summer 2019, with “pricing strong”.
Last October, both Tui and Jet2holidays were licensed to carry around 5.3 million Atol passengers, although Tui’s Marella Cruises and flight-only sales brought Tui’s total to 5.75 million.
This year, Jet2holidays has made a statement to the industry, increasing its Atol to 5.86 million – ousting Tui as top Atol holder after nearly three decades.
Jet2’s advance is bold, because its pre-pandemic high was 4.8 million. However, Tui is also looking forward to salad days this summer, with Richard Sofer, Tui’s UK and Ireland commercial and business development director, reporting “much-improved” business in January and February “still rolling through into March”.
Such bullishness might normally spark concerns about a glut of late sales, but crucially, the collapse of Thomas Cook in September 2019 has left a 2.5 million-passenger-sized hole to fill.
EasyJet holidays is another operator taking up the slack. From its launch in 2019, it has grown to be licensed for 1.29 million passengers. In January, easyJet said its package holiday brand was “over 60% sold for this summer”.
It had previously forecast 30% growth year-on-year, but added: “Considering current levels of demand, we now expect to see growth of around 50% [compared with 2022].”
Airport coordinator ACL confirms confidence among airlines, particularly at regional airports. Manchester’s expected summer 2023 seats total is estimated at 27.2 million, up 21.8% year-on-year, with Jet2.com gaining another 76 weekly slots. Birmingham’s 12 million seats is an 18.7% increase, with Jet2 again growing sizeably. Meanwhile, Gatwick’s is 39.56 million, up 6.6% year-on-year.
The view from destinations is also optimistic. Greece is proving a hit following partnerships with Jet2 and easyJet, along with moves to extend the season. EasyJet holidays’ customers were the first to plant the British flag on Rhodes this year, with a water cannon salute greeting them in mid-March.
Last year, Greece saw 4.4 million UK visitors, 900,000 more than in 2019, with the Greek National Tourism Organisation (GNTO) persuading airlines and operators to serve less well-known destinations such as Symi and Halkidiki.
Eleni Skarveli, GNTO director UK and Ireland, says bookings are already ahead of 2022. “Capacity has really increased this year – maybe by a third,” she said, describing Skiathos and Zante as “booming” with Greece also experiencing a big increase in city breaks to Athens and Thessaloniki.
Skarveli said feedback from consumers wanting seat-only deals had led airlines to add capacity to popular destinations. “I don’t think flights are going to be a problem,” she said.
If Greece is forging ahead, Spain’s approach is more conservative. Manuel Butler, the Spanish Tourist Office’s UK director, said connectivity “has improved dramatically and airline capacity to the country has more or less recovered to pre-pandemic levels”, but estimated this at “around 3% below 2019 levels”.
Chris Webber, head of holidays and deals at OTA Ice Travel Group, said Spain was still “number one this summer” with, in mid-March, around 55% of summer bookings on Icelolly and 45% on TravelSupermarket.
One note of caution, though, comes from the reborn Thomas Cook, which said that while average spend was up by 5-8%, consumers were looking for value. “People are not necessarily spending less, they are choosing destinations that are better value,” said David Child, brand and PR director.
Greece is Cook’s top seller, but Child added: “Morocco, in particular Agadir, has way higher growth than other destinations, as does Tunisia. Fuerteventura is out-selling Lanzarote, usually the second-biggest island for us. Mainland Spain is doing particularly well, and it’s cheaper than Majorca.”
He added there was “a lot of demand” for five-star all-inclusive packages to Turkey. Cook reported consumers seeking slightly shorter durations for beach holidays but with buoyant city breaks sales, which made up “25-30%” of peaks sales. The OTA has also introduced packages flying with mixed airlines this summer. “In some places in peak months, capacity might be constrained,” Child warned.
'Upward trajectory'
Constraint is not the word for Turkey, which received a record 3.4 million UK visitors in 2022, 810,000 more than in 2019, thanks to the collapse of the Turkish lira. Operators are betting on it again for summer 2023 – two years ago, a pound bought less than 11 Turkish lira, but rates are double that now.
A Turkey spokesperson said UK tourist numbers “are predicted to continue their upward trajectory”. Capacity has certainly been piled on – and piled on late – such is the confidence.
“In the past month alone, new Wizz Air flights from Gatwick to Istanbul, Antalya and Dalaman and from Luton to Istanbul, as well as new easyJet routes from Edinburgh to Antalya, Luton to Izmir and Manchester to Istanbul, have been announced,” the spokesperson added.
This comes after Turkish carrier Corendon Airlines put 500,000 seats into six UK airports, flying to Antalya and Dalaman. Jet2, meanwhile, has extended the season, flying to these destinations from March and June from seven airports.
It’s a generally confident outlook among operators and destinations with healthy pricing, yet high demand. It’s not often the question is asked about the mainstream summer package market, but could 2023 see a race to the top rather than the usual spiral to the bottom the industry has for too long become accustomed to?
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Gary Noakes
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