Executive Summary
This Market Assessment report reviews the current market trends and supply side developments for the UK short-breaks market, encompassing both domestic and overseas short breaks.
In the 1990s, the market for short breaks grew rapidly and outperformed the travel and tourism market overall, making it was one of the leading sector performers for UK travel and tourism. However, since the 1999/2000 financial year, the growth rate for short breaks has slowed and kept broadly in line with the travel market as a whole. Although the market share taken by short breaks overall has been relatively stable since 1999/2000, it disguises the increasing share of short breaks in the outbound market.
In 2001, the UK short-breaks sector declined for the first time since 1991. A number of factors in the past few years have led to this drop in demand, including the petrol blockades in September 2000, the difficulties experienced by the rail transport after the Hatfield disaster in October 2000 and the foot-and-mouth epidemic in 2001. The domestic short-breaks market has also suffered from increased competition from outbound short breaks as a result of the increasing availability and price-competitiveness of low-cost `no frills' airlines.
Domestic short breaks are characterised by a high level of short breaks organised independently and without bookings. This is also becoming a greater feature of the independent outbound short-breaks market, which is growing at a faster rate than packaged short breaks. The increase in the percentage of independently organised outbound holidays is being driven by the higher growth in the number of independent short breaks being stimulated by low-cost carriers.
The channels of distribution for short-break products are, in general, the same channels as those used to distribute holidays to the UK market. Tour operators and retail agents are important for outbound short breaks, whereas they only have a marginal role in the domestic short-breaks market. Most domestic short breaks are undertaken without booking and, of those domestic short breaks that are packaged, around half are booked directly with the operator.
The high level of independence for domestic short breaks means that there is very little in the way of formalised competitive structure. The formalised competitive structure is more apparent in the outbound sector. Like outbound holidays overall, the outbound short-breaks sector is dominated by the `big four' vertically integrated operators, although there are a significant number of niche independent short-break players. One of them, Travelscene, has a significant share of the outbound short-breaks market.
The number of short breaks taken in any year exceeds the population. Therefore, the average number of short breaks taken by a UK resident is more than one per year, but 15% of UK adults have never taken a short break. There are few differences in the consumer profile between domestic and outbound short-break travellers and, indeed, there are relatively few profile differences between short-break travellers and the UK population as a whole. There are more profile differences between the type of short breaks taken, classified by destination in terms of an area with a cultural/historical interest, beach, activity or lakes, mountains or countryside. There are also significant profile differences in the type of accommodation used for short breaks.
The impact of low-cost airlines, the ageing profile of experienced travellers and the increasing household penetration of the Internet is encouraging independent overseas short breaks. This is the driving force of behind the growth in the short-breaks market. Key Note forecasts that the trend favouring outbound short breaks will continue, whereas the growth in domestic short breaks will be relatively low, in spite of the fact that the recent slowdown in growth has been caused by exceptional factors.
In December 2003, MyTravel, one of the UK's `big four' integrated tour operating groups, announced the largest pre-tax loss ever made by a package holiday company of £910.9m for its financial year ending September 2003. Although much of the loss was related to write-offs and accounting adjustments, the operating loss was still £358m, most of which was associated with package holidays for the UK market. MyTravel's predicament is more severe than for the packaged holiday industry overall, but is symptomatic of a depressed market that is moving towards self-packaging. Irrespective of whether MyTravel survives or not, the repercussions are bound to have some effect on consumer confidence in package holidays and give a fillip for self-packaging. It may also, increase the proportion of short breaks taken in relation to overall holidays
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