LONDON/MALAGA, Spain--Sun seekers are turning to package holidays in Europe as soaring hotel and flight prices revive demand for the all-inclusive deals that had fallen from favour, bolstering the balance sheets of some travel companies.
The combination of a cost-of-living crisis and disruption from strikes and glitches has added to the appeal of a fixed-price package without unexpected add-on costs and easier redress when things go wrong. After years of travellers using the internet to compile their own itineraries, travel analysts say a trend of buying a ready-made package that began last year has accelerated this summer, the busiest for travel since the pandemic.
"It's something that you think would have died out back in the seventies," Stuart Hatcher, chief economist at aviation data analysis firm IBA, said. "Since COVID, more people are booking package trips."
Spending on package holidays in Europe - most popular among Britons and Germans - is expected to reach $117 billion this year, up 11% from a year ago and will hit a new peak of $125.9 billion next year, according to Euromonitor. The resurgence helped TUI, Europe's biggest tour operator, to report on Wednesday quarterly results that beat expectations.
The fixed upfront costs and value for money are appealing, said Caroline Bremner, Euromonitor senior industry manager for travel. "In times of peak inflation, as over the past two years, (packages) enable consumers to budget more efficiently," she said.
Britons on average spend about $450 per capita on these getaways, Euromonitor's figures show, as the package holiday provider negotiates deals with hotels, transport companies and other players to drive down costs.
But even packages will get more expensive, the market research company forecasts. It predicts prices will grow at a compound annual growth rate (CAGR) of 3.5% between 2024 and 2029, faster than before the pandemic when they rose at a pace of about 1.3% from 2014-2019.
The zest for the holiday package business is a bright spot for the travel industry as worries have grown that the post-pandemic enthusiasm for air travel will ebb as travellers baulk at higher fares. Particularly in Europe and North America, airfares rose sharply after the pandemic.
Second-quarter results by major carriers pointed to tougher market conditions across the aviation sector. Last month, Lufthansa warned of a fall in third-quarter earnings as the German airlines group grapples with higher wage costs and limited room to raise ticket prices while Ryanair and Air France-KLM reported plunging quarterly profits. Shares in Europe's major airlines and travel companies have fallen this year.
In contrast, easyJet raised its full-year outlook for its package holiday business, which launched in 2019 and accounted for more than a quarter of group pretax profit last year.
Package holiday bookings for UK-travel company Jet2 are up 7% this summer, representing about 72% of overall flown passengers, it said in its annual report published last week.
Croatia, Cyprus, Greece, Italy, Malta, Portugal, mainland Spain, the Balearic Islands, the Canaries and Turkey are all popular. The company this week extended flights to Bodrum in Turkey until mid-November due to strong demand.
Norwegian Cruise Line Holdings, Carnival and Royal Caribbean Group also raised their annual profit forecasts as people flock to its cruises.
