The tour operator Thomas Cook expects the price of holidays for British travellers next summer to rise by 7% in the face of climbing oil prices and weakness of the pound against the euro.
The group's chief executive, Manny Fontenla-Novoa, said that summer breaks for 2009 were already on sale at these higher prices and he predicted that average prices would remain 7% ahead for next year.
He blamed the impact of soaring oil prices on the cost of flights but also the escalating cost of accommodation in the Eurozone as the pound weakens. Thomas Cook's accommodation costs are typically four times its fuel costs.
With holiday spending money for 2009 also expected to be hit by the strength of the euro, next year is likely see a steep decline in holiday travel. Other headwinds facing the market include fast diminishing disposable income among UK consumers, an expected rise in unemployment and creeping inflation on essential goods such as food as well as fuel.
Thomas Cook, which merged with MyTravel last June, has said it will reduce capacity for next summer by about 5%.
Other big tour operators are expected to push through similar price rises. In anticipation of changing demand patterns, the group has been promoting sales of cruise holidays and breaks to destinations outside the Eurozone for next year, in particular Turkey.
Fontenla-Novoa said Thomas Cook, which sponsors Manchester City football club, was "in a very good position for the summer season" this year, with 19% fewer holidays left to sell in Britain than at the same time last year. Oil and euro currency exposure for the current financial year is fully hedged.
Bookings for this summer were down 6%, but they had been achieved at a price on average 5% higher than last year, in large part because of industry-wide moves to scale back capacity. Thomas Cook alone has reduced its Summer 2008 capacity by 9%, including a 22% reduction for shorthaul destinations.
"For the first time in a long time supply is maybe less than demand," Fontenla-Novoa said. The industry had been struggling in recent years as it lost business to low-cost airlines and failed to cut capacity fast enough.
He said: "I'm delighted with our performance over the winter and we are in a very good position for the summer season. I remain confident that we will achieve our goals for this year. For the longer term, our strategy is on track, our merger synergies are coming through, and we continue to target £480m of operating profit in 2009/10."
Shares in Thomas Cook last night closed up 7.25p at 241.5p.
guardian.co.uk © Guardian Newspapers Limited 2008
