This week’s ash cloud crisis is expected to further dent the prospects for the European travel sector which was already facing its second successive year of declining reveneus.
Online travel ‘set to grow against overall decline’
The online travel sector could see growth in 2010 despite a second year of overall decline in the market, according to research commissioned by Kelkoo.
A report by Kelkoo carried out with the Centre for Economics and Business Research forecast a 0.4% (€1.6 billion) decline in travel expenditure this year – a figure which could worsen following this week’s ash cloud crisis.
This is on the back of a 7.8% decrease in 2009 when overall expenditure was €368.9 billion, compared to pre-recession 2008 when that figure was almost €400 billion.
However, Kelkoo claimed the online sector would continue to see growth with a record €74.3 billion turnover predicted for 2010, around 20% of overall travel expenditure.
The flying ban caused by volcanic eruptions in Iceland is expected to further dent the prospects for the European travel sector, which was already facing its second successive year of declining revenues.
Kelkoo, which claims to be Europe’s largest e-commerce advertising platform, said with the ash crisis estimated to have cost airlines €180.4 million per day the European industry was set for a “turbulent ride”.
Elsewhere in the report, UK, France and Germany were predicted to remain as the highest spending countries on travel accounting for 58% or €214.8 billion of sales in Europe.
The UK has seen travel spend decline in the last two years from a high of €60.6 million in 2007, the Kelkoo report predicting it will fall to €44.1 million this year from €46.5 million in 2009.
Bruce Fair, managing director of Kelkoo UK, said the industry should expect further weakening demand as a result of the volcanic ash crisis for some time to come.
He said: “It is likely that demand for travel will be negatively impacted by the disruptions from the volcano eruptions.
“We would expect a significant share of consumers to alter their travel plans as long as there is the risk of further eruption impacting air traffic, which could be the case over the next few months.
“As such consumers will consider alternative arrangements like holidays at home or destinations available by other means of transport or putting off travel expenditure. Overall, this will put downward pressure on travel spending for some time.”
Fair also warned flight prices will go up, at least in the short-term.
“There will be a supply issue with many planes not in the right places and it will take some time before full capacity is restored in the market,” he said.
“Additionally, most airlines were already struggling before the travel chaos from the impact of the financial crisis and strong competition in the industry.
“With profit margins tight it is unlikely that prices will come down. Indeed, it is more likely that airlines are forced to increase prices to recoup some of the immense extra cost incurred by the ash cloud.”
