Bookings could swing back to euro-zone countries in the summer lates market as a result of cheap flight seats still left to sell and reduced hotel rates.
Already hoteliers in Spain and Portugal have started to push out low price deals in the late market to stimulate demand, according to On Holiday Group chief executive Steve Endacott.
He said: “The cheapest holidays will be in the euro-zone. Hotels are introducing more aggressive rates and there are lots of seats left to sell, which is why we seeing a swing back to the euro-zone in the lates market.”
Stock left to sell includes charter and low-cost flights to the western Mediterrean, such as Majorca and Menorca, following poor early sales, said Endacott.
He claimed the battle in the lates market will be between bed banks and traditional tour operators to bring the cheap late deals to market the fastest, with the last two weeks before the key school holiday period a key period.
“A crucial date in the late sales market will be the weekend of July 11-12. If anybody is going to lose their nerve and drop prices they will do it around that weekend to give them two weeks to clear the stock,” he added.
Ahead of Thomas Cook’s half-year results, out on Thursday, KBC Peel Hunt leisure analyst Nick Batram is also predicting further rate cuts by hoteliers to encourage late bookings and maintain margins of mainstream tour operators.
He said: “At the moment it’s not tour operators that are cutting prices to get bums on seats, it’s hoteliers. Spanish hoteliers have been slower than Greek hoteliers to do this and this is now going to come through.
“These prices are being used by mainstream operators to stimulate demand. They will pass on these cuts but they will try to keep some to help their margins.”
A swing back to euro-zone bookings could be encouraged by the recent improvement in the poor euro-pound exchange rate, which has been a key factor in driving bookings to non-euro destinations such as Turkey and Egypt.
Barclays Capital is forecasting a recovery in the exchange rate to 1.15 euros to the pound in three months’ time, 1.20 in six months’ and 1.25 in 12 months’ time.