Agents should brace themselves for a ‘tight summer’ due to the impact of the Middle East conflict, according to ABTA Chief Executive Mark Tanzer, but they can console themselves that the situation could have been far worse.
Addressing delegates at the ABTA Travel Matters conference this week, Mark said the impact of the Middle East conflict would stretch into the medium term, ‘at least’.
“In the short term, everything is pointing to a tight summer market for the travel industry overall,” said Mark.
“Although there are bright spots, such as cruise, there is evidence from our research that apprehension generally, and the rising cost of living here, are dampening early season booking levels, albeit that the underlying intention to travel is still strong.”
Mark said that while ABTA ‘stands behind’ the Foreign Office advisories, which currently limit travellers’ ability to travel to and via the Middle East, he added: “We continue to liaise with them to emphasise the impact of not being able to transit through the Gulf.
“Unfortunately, the fragility of the current ceasefire, and the diminishing credibility of ‘deal’ announcements from the White House, mean that this advisory is unlikely to change in the immediate future.”
Mark said that the closure of the Strait of Hormuz had led to some ‘alarmist’ reporting about short-term fuel shortages, flight cancellations and steeper prices for travellers.
“ABTA has been at pains to reassure UK customers that, in reality, cancellations are running at fewer than 1% of scheduled flights, and are in line with historical re-scheduling levels, and that flights remain competitively priced, partly because airlines had fuel hedging strategies in place, and partly because they are all competing vigorously for the customers’ business,” he added.
Deloitte Chief Economist Debo De said that while the Middle East conflict had caused the largest disruption of oil supply in history, prices hadn’t risen as much as expected.
He put this down to the global economy becoming more oil-efficient, the investment in renewable energy and the US becoming a major oil exporter, reducing the West’s reliance on the Middle East.
“We also have quite significant strategic stockpiles. The Netherlands has enough for a year, the UK has around three months,” added Debo.
Tim Alderslade, CEO of the trade body Airlines UK said some of the fears expressed at the start of the Middle East crisis had turned out to be incorrect. “All the information from the Government is that we are not seeing a shortage,” he said, adding that more oil was now being sourced from the US and African countries.
“I am not going to say we are completely over the worst, but we are certainly in a better place than we were a couple of months ago.”
Debo said the impact of the energy shock on inflation is likely to be short-lived. In fact, he said the UK economy has been less badly hit than the OECD international forum had forecast.
However, he warned that unless the Strait of Hormuz reopens by the end of July to allow goods, including oil, to travel to the West from the Gulf region, we will see some of the disruption already being experienced in Asia.
He pointed out that 12 million barrels of oil a day is being lost due to the conflict, so once reserves have dwindled, the West will feel a greater impact.
James Bland, Commercial Director for Travel, Hospitality and Leisure of market research company Ipsos said spending on travel was down nearly 6% year on year in both March and April.
“If you have seen a drop in spending, you are not alone,” he told the conference, pointing out that travel agents and airlines have been hardest hit, according to the latest Barclays Consumer Spend Report.
In April, an Ipsos survey of over 1,000 adults found that 5% had cancelled a holiday because they were concerned they wouldn’t get home, and a further 10% said they were considering cancelling.
On the Beach CEO Shaun Morton said the shortening of the average lead time, which had started in 2024, had accelerated this year. Currently, lead times are 10% shorter than a year ago, he said.
“We are seeing a lates market with lots of price and promotional activity,” said Shaun. “If you are a customer looking for a holiday, you will find a deal.”
However, he said he is confident this summer will be ‘bigger than last year’.
