Andrew Laurillard, head of brand strategy at TUI Travel, which owns the Thomson and First Choice brands, expects the number of people taking package holidays to increase significantly following the recent collapse of the XL Leisure Group, which left thousands stranded in resorts. Anyone buying an ATOL-protected package holiday has financial protection in the event of a failure, but those who book flights or hotels directly with a company do not.
'The threat of the core erosion of package holidays has gone away,' says Laurillard, who believes the travel industry will experience a rise in premium holiday packages as tour operators become more sophisticated. 'There will be a demise in marketing of £400 holidays and less self-catering breaks,' he predicts. Demand for all-inclusive holidays has risen by 30% over the past five years, according to Laurillard.
TUI Travel is investing in its package-holiday offering as it repositions as an entertainment brand. Thomson recently launched the Sensatori Resort, an upmarket hotel featuring swim-up and private-pool suites that offers holidays at mid-market prices. First Choice, meanwhile, has expanded its family-focused Holiday Villages with more activities for families, from soccer schools to dance and singing workshops.
In 2006 and 2007 the number of people booking top-end package holidays under the First Choice Premier or Thomson Gold or Platinum brands increased 20% annually to more than half a million passengers. 'The package-holiday market's reputation already lags behind the reality,' claims Laurillard. 'We are not just a manufacturer of holidays.'
Thomas Cook recently relaunched tour operator Direct Holidays with a campaign using the theme of customer advocacy, having acquired the company following its merger with MyTravel last June. It sells package holidays to consumers direct over the phone, via its website and through its five UK high-street stores.
Insiders had predicted that the package holiday would be killed off as a result of the growth of internet bookings and budget airlines. The proportion of the travel market accounted for by package holidays - the staple of the traditional travel agent - declined by about 10% between 2002 and 2007, according to Association of British Travel Agents (ABTA), as a more consumers abandoned the high street in favour of putting together their own holidays, using sites such as Expedia, Opodo and lastminute.com, or buying flights direct from no-frills carriers. Changes in the nation's travel habits driven by falling airfares and a shift in working patterns also hit the traditional two-week summer holiday, with consumers opting for more frequent, but shorter, breaks.
The response of traditional package-holiday specialists to the threat of the web operators' more flexible offering was to consolidate, as demonstrated by the mergers of Thomas Cook and MyTravel and of TUI and First Choice in 2007. The market started to pick up last year, with 53% of the 46m people travelling overseas in the year to June holidaying on a package, according to Mintel.
Before the recent insecurity about travel companies' financial security took hold, Thomas Cook chief executive Manny Fontenla-Novoa had predicted the market would recover. Speaking at last October's Travel Convention, organised by ABTA, he said the package holiday was still a valuable segment of the travel market, despite no growth in recent years, and would provide Thomas Cook with a platform to expand into areas such as independent travel and financial services. 'Let [the media] think package travel is dead, but we can make more money out of it than any other area,' said Fontenla-Novoa.
However, Long warned that traditional operators would have to adapt the package model from seven and 14-night products to compete with budget airlines on short-haul routes.