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Last Updated: Thursday, 7 April 2005, 23:02 GMT 00:02 UK
Sunset for the package holiday
By Marianne Lueck
BBC Money Programme

In the 1950s only 1% of Brits had ever travelled abroad on holiday, but with the growth of air travel and post war prosperity millions of us were soon travelling to the sun on all inclusive deals.

Holidaymakers
Package deals revolutionised the travel industry

By the 1970s, Spain was a favourite destination and resorts like Lloret de Mar on the Costas were full of Brits on seven or 14 night package deals.

Holiday companies such as Thomson grew big as people escaped to the sun.

The 1990s heralded a big change in travel as the internet expanded and low cost carriers offered new ways to travel.

Low cost carriers like Easyjet and Ryanair offered flights to the sun for less than their competitors and they allowed customers the opportunity to travel when they wanted.

Massive savings

In the last few years the growth of the internet has meant that many people have now become travel agents in their own home, doing away with the need for agents' shops on the high street.

Beach holiday (generic)
Many travellers shop around for cheap deals

Some independent travellers think they can get a better deal on the web.

Julia Gerrard from Barnsley reckons she can save 800 on a holiday by booking it herself.

"I gave up on the package because I knew they were never going to be any cheaper," she says.

For the first time ever, more of us are choosing to book our holidays independently and fears are being expressed for the future of the big holidays firms.

Household names like Thomsons are seeing their core package holiday product suffer a dramatic loss in market share.

The travel industry is growing by around 12% a year. The package however is stagnating and on the Spanish Costas it's in decline.

Brits buying abroad

Another threat to the traditional Spanish package holiday is the number of British people buying property abroad.

Easyjet plane
Low-cost carriers pose a threat to traditional holiday firms

So far over half a million own a foreign property and Spain is growing in popularity.

New developments are spreading and this means a very real threat to the package holiday companies.

Now people will no longer need a holiday to Spain just a cheap flight.

Fighting back

For the big tour companies, urgent action is required, according to Peter Rothwell, managing director of Thomson UK.

"It's absolutely imperative to change," he says.

"There is no doubt that what we have done successfully for 30 to 40 years has now come under tremendous pressure."

So Thomson has launched a concept it calls "dynamic packaging" where customers can book their flights and accommodation separately; a big change for a company that grew big on selling all inclusive deals.

"The whole customer experience needs to change and reflect that modern view of the world," says Miles Morgan, sales director for Thomson UK.

Harsh competition

Thomson has also launched and is expanding its low-cost airline, Thomsonfly.

Rula Lenska in Thailand
Exotic holidays in new locations could keep package tours alive

The big question is whether the company can compete with established no-frills operators Easyjet and Ryanair.

City analyst Andrew Monk thinks it may be difficult.

"They're household names and I would not like to compete against either of them."

New destinations

But Thomson has not given up on the package holiday and the company is keen to breathe new life into a key part of their business.

New and more exotic destinations are now an essential part of their strategy as they are out of the reach of the no-frills. Besides, customers still want a rep and the support that a package can give them, the company insists.

Mr Monk warns that there's a lot at stake. "If they don't start developing some of the new resorts, developing new products, giving the customers a better deal, [the package holiday companies] will die."

Sunset for the package holiday will be broadcast on BBC Two on Friday 8 April at 1900.



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