Travel companies face the perfect storm

A combination of a the credit crunch and a weak pound against the euro is leading many in the travel industry to predict a summer of business collapses amongst tour operators.

News last week of the collapse of two travel firms has sparked warnings that more could follow, with some observers predicting the industry is heading for a crash.

Barwell Travel (which is the market leader for sports tours to Spain) and Essex-based travel agency Mayflower Travel went out of business within hours of each other last Friday. Both blamed the economic downturn caused by the credit crunch and the reduced attractiveness of popular European destinations wuch as Spain due to the weaker pound.

Holidaymakers preparing for their annual trip to Europe’s sunspots will find themselves digging deeper into the wallets, purses or credit cards this summer.

Tens of millions of British tourists will discover that the soaring value of the euro against the pound forces them to pay more for everything from the price of a coffee in a Parisian cafe to a hotel room in Barcelona. UK holidaymakers have almost a fifth less spending power on the Continent than a year ago.

The 42 million foreign holidays a year that British people take are influenced by affordability and, during the past two years, the cheap dollar has lured thousands more Britons to visit Florida and New York

However, the majority of foreign holidays, some 31 million, are taken in the eurozone and going there – and staying there – has become markedly more expensive.

Couple this with the effects of the domestic credit crunch, and you can see why package holiday companies specialising in the eurozone destinations are starting to worry. Of course there will be winners as well as losers. Perhaps 2008 will turn out to be a golden year for the domestic (UK) tourist industry, with tourists taking more short breaks and mai holidays at home rather than flying overseas?