Cheap deals beat packages

The package holiday is losing its appeal thanks to the cheap deals offered by budget airlines, according to new research.

Holidaymakers can save more than 50 per cent of the cost of their summer break if they are willing to book flights and hotel rooms themselves rather than take a ready-made trip, says the study by investment bank Goldman Sachs.

The company found that in more than 70 per cent of cases it was cheaper to book flights and hotels separately through the internet rather than as a package through a High Street tour operator.

In one case, a trip for two to La Manga in Spain cost £785 through the package tour operator MyTravel but only £349.80 when flights were booked through Ryanair and the internet site Hotels.com.

The report says that the ease with which consumers can book trips over the telephone and internet is leading to a dip in bookings for package holidays.

"The raison d'etre of a package holiday company is that it should be cheaper to book a package rather than doing it yourself," the report says.

"However, in 70 per cent of cases, we found that it was cheaper to book your own flight and hotel separately.

"We believe the relative discrepancy is quite compelling and indicates that the package holiday industry is potentially in terminal decline - especially with more single people, as opposed to families, going on holiday, increased online bookings and the rise of the low-cost airline industry."

In the past few months, package tour operators have been reeling from the effects of the Gulf War and terrorist threats. A recent report by Advantage Travel Centres showed that one in four Britons had delayed booking their summer trips or were considering cancelling them altogether because of the volatile international situation.

Package tours to Florida, usually a gold mine for travel agents, have been especially hard hit because of fears about travelling to the US.

Although summer bookings are now picking up as firms begin to heavily discount their holidays, Goldman Sachs believes that overall bookings will still be down by 10 per cent this year.

Yesterday, the Association of British Travel Agents, which represents package tour operators, said it was not convinced by the findings.

"Bearing in mind the buying power of the package tour operators and the price they offer, this is not necessarily true," a spokeswoman said.

However, budget airlines said they were delighted by the report. "This has been a trend for some time and one we have been encouraging," a spokesman for easyJet said.

"More and more people are benefiting from this and the low prices that booking over the internet can provide. It is fantastic that consumers have realised that shopping around pays and they can get the same holidays when they book independently as they do from package tour operators."

And the enthusiasm for DIY breaks has not escaped the notice of some of the High Street tour operators.

This year Thomson decided to abandon the classic package deal, telling customers that an in-flight meal and coach transfers to the resort would cost at least £10 extra.

Meanwhile MyTravel, formerly Airtours, has begun to heavily promote flight-only deals in a move to win back customers.