Sales by package tour operators were up 12% in the year to the end of September 1998, the second increase in a row.

UK holiday destinations are becoming less popular

Nearly 16m people travelled abroad last summer with tour operators like Thomson and Airtours, breaking the previous record of 14.2m by more than 10%.

"The industry has had two years of strong demand, with record numbers of flights and holidays sold at prices that allow a profit margin for most operators," said Helen Simpson of the Civil Aviation Authority, which regulates the package holiday industry through the ATOL licensing scheme.

Industry turnover was £10.2bn ($16bn) for the year, two-thirds of which was in the summer months from April to September.

Licensed capacity for the winter season this year is up 10%, suggesting that companies think the travel boom is continuing.

Clouds on the horizon

That optimism may be unjustified however if the latest consumer spending survey from the research consultancy Mintel is to be believed.

They say that consumers have turned cautious this year. Repaying debt, rather than splashing out on expensive holidays or flash cars, is now the priority.

Mintel suggests that the boom in holidays in the past two years has been driven by the huge windfalls enjoyed by consumers when many building societies converted to banks.

The canny consumer has already had one success in relation to the industry. The average price of a package holiday actually fell slightly last year, from £409 per person in the summer of 1997 to £406 in 1998.

Moving abroad

The biggest UK package holiday operators have already begun a strategy of establishing subsidiaries abroad in order to smooth out the year-to-year variation in the fortunes of their business.

Airtours now gets nearly half its bookings from overseas, and has made major purchases of holiday companies in Scandanavia and Canada in recent years.