Been on holiday anywhere nice this summer? Have you noticed more people have chosen Spain this year? I for one went there for the first time in well over a decade after visiting Egypt, Greece and Cyprus in recent years.
So, why is Spain even more popular this year? Well, yes there will have been PR campaigns, but many of the resorts are already established and therefore the internal factors influencing the trend may be limited as holiday makers know what they are getting.
The perception however is that these are ‘safe’ destinations, away from the ‘fear factor’ that exists in other countries, such as Egypt, Tunisia and more recently Turkey, due to terror attacks and political turmoil. Therefore, external factors, outside a business’s control, can have a far greater impact on trend.
Looking at how these events have impacted businesses made me think:
- How quickly things change – During the early season France saw a rise in bookings, but following the recent terror attack, there is likely to have been an impact. The same could be said for Florida and concerns about the Zika virus;
- Simple economics – Capacity in the ‘safe’ destinations has not significantly changed, but demand has increased, which could lead to price increases. Furthermore, current foreign office advice has impacted UK tour operators’ ability to offer holidays in certain destinations;
- Time lag – Unless you are extremely spontaneous you don’t book a holiday one day and fly the next and neither do the tour operators. Often hotel rooms are pre-sold to the tour operator, e.g. TUI, and these rooms are then marketed to final customers. Both steps will often happen well in advance of the holiday, which means the shift towards the ‘safe’ countries is likely to have a lag;
- Capacity – Whilst there may be room capacity across a region, occupancy at each hotel will differ.
To illustrate this, let’s look at an example comparing two neighbouring hotels – Hotel Average and Hotel Better. Hotel Average and Hotel Better had 60% and 80% occupancy in 2015 respectively. They are both located in a ‘safe’ location so demand has increased in the region in 2016.
Hotel Average has the greater opportunity to increase its occupancy as it has more rooms available, but holiday makers may choose to book at Hotel Better until it is full before booking a room at Hotel Average.
The cost of rooms may also increase due to the increased demand, although it is possible that this increased revenue could sit with the tour operator if rooms are pre-sold at an agreed rate, at least in 2016.
For 2017, the proportion of pre-sold rooms may increase, but this growth may be limited by room capacity. However, future positive or negative events may also impact demand in 2017 compared to 2016 and the decision on where to spend that precious one or two week break is often an emotional one.
So when you are next deciding whether to sip on a sangria in Spain or have a post dinner limoncello in Italy, just think for a moment why you are where you are and whether you have followed the trend…..…but not for too long, it is a holiday after all!