Over the long term, international leisure travel has grown strongly, at roughly twice the growth rate of the economy as a whole, and it has proved resilient to major short-term shocks, such as the early 1990s recession, 9/11 and the 2003 SARS health scares (figure 1).

The simple fact is that people enjoy holidays, and the generation which first ventured abroad for two weeks in August has matured into one which is more confident, has more free time and disposable income, and a growing appetite for adventure. They have been joined, as their children reach adulthood, by a new generation which regards international travel as a top spending priority; many of them supplementing a main summer holiday with a second winter break and weekends abroad.

Growth in independent travel

Many more choices are available to the modern traveller than existed even five years ago. New destinations are opening up all the time; the internet provides almost infinite sources of information, inspiration and opportunities to make travel arrangements; much greater flexibility exists in tailoring holidays to individual requirements; and low-cost airlines have opened up new destinations at affordable prices.

In this context, it is unsurprising that much of the growth in the market has been accounted for by a sustained increase (approximately 5% per annum) in independent travel, where consumers buy the elements of a holiday separately (figure 2).

Resilience of package holidays

However, this growth in independent travel has not been at the expense of the package holiday, where demand remains robust as a consequence of consumers’ appreciation of the convenience, quality and great value for money such packages bring. Indeed, the fact that someone is there to sort things out if something goes wrong – whether it be a major crisis or something as simple as a flight delay leading to a missed connection – is something many independent travellers have learned to appreciate only when they have found themselves without that reassurance.

Addressing our challenges

Although there are concerns about the sustainability of long distance mass market leisure travel, which has provided political cover for increased taxation of aviation, these concerns have not as yet had any discernible effect on demand and seem unlikely to do so for the foreseeable future.

While the long-term trends are clear, the current global economic crisis creates significant uncertainties in the short term, and we have already seen the failure of a number of airlines and smaller tour operators. However, the lessons of the recession of the early 1990s are important here. At that time, UK unemployment approached three million, and a major UK tour operator, ILG, failed. The reduction in market capacity resulting from the failure of ILG (even after other tour operators added further flights to exploit the opportunity) led to a period in which, despite recessionary pressures, tour operators delivered very strong financial results.

While the situation in 2008 is very different in some respects, the consolidation we have seen in the market following the mergers of Thomas Cook and MyTravel, and TUI and First Choice, has led to similar levels of capacity reduction, and makes the immediate prospects for the industry more positive than for some other market sectors.

Furthermore, a number of consumer studies conducted during the final quarter of 2008 have confirmed that people are as committed to their main annual holiday as they were before the recession bit. In addition, recent company failures have reminded people of the security provided by the UK Government consumer protection schemes benefiting those who book packages with a tour operator; a compelling reason for many independent travellers to think again.

At times like this, there is no question that consumers seek comfort in the reassurance of buying from established and trusted brands – and in that respect, Thomas Cook is clearly the number one brand in the UK, and a brand which has considerable equity worldwide, thanks to its history and financial services business. UK consumer research consistently shows the Thomas Cook brand as enjoying a significant advantage over its rivals in terms of consumer trust and travel expertise.

Outlook

In the medium term, there is every reason to believe that the longer-term trend of strong growth in demand for international travel will continue, and even accelerate, as the fast-growing BRIC (Brazil, Russia, India and China) markets develop, and their huge populations take advantage of their increasing prosperity to experience the same joys of international travel as their counterparts in the West. In those developed markets, travel companies will be challenged by the need to satisfy the growing demand for holidays tailored to personal needs and wants, while still delivering convenience, reassurance and service.