The days are dark. The wind is cold. At this most dreary time of year, British consumers usually cheer themselves up by booking two weeks in the sun for August and UK package holiday industry chiefs drag their spirits out of the winter doldrums by listening to the sound of shillings pouring into the tills.
But not this year: in the two months after the 11 September terrorist attacks on the US, British bookings for summer 2002 holidays abroad slumped by up to 40 per cent; leading tour operators cut capacity for summer and axed more than 4,000 jobs. Now they are offering discounts on packages of up to 50 per cent. These headline-grabbing reductions only ever apply to a limited supply of holidays. But nevertheless, discounts at this time of year usually only reach around 30 per cent - and even that kind of price cut is usually viewed as faintly ridiculous in a business where profit margins in major companies can be as low as 1 per cent on each package sold.
At present, however, many people are more likely to spend any surplus cash on a new cooker, three-piece suite or weekend break with a low-cost airline than on a fortnight in Florida. Or they are holding back with the intention of booking later - in the hope of getting a last-minute bargain or to see how the international political situation pans out.
The leading companies jealously guard their booking figures at this time of year, but one industry observer said the signs from the top four operators - Thomson, Airtours, First Choice and JMC - are that reservations for summer 2002 over the crucial Christmas and New Year booking period were down around a quarter on the same time last year. While that is a serious dent in the market, it is a significant improvement on sales two months earlier.
The main companies have already slashed capacity by 15 per cent, particularly to destinations giving the most cause for nervousness, such as the US, the Middle East, Turkey and Cyprus. Meanwhile the Association of British Travel Agents predicts that demand for the summer will recover to a net decline of 5 per cent compared with last year.
ABTA reported that from 23 December to 2 January the number of people travelling abroad was 5 per cent up on the same period last year, a festive exodus of 1.1 million people that is being read as encouraging news for the travel industry. 'People have not come rushing out of the traps to book their 2002 holidays but things are better than they might have been,' an industry source said.
If bookings start to recover dramatically in the next five or six weeks, the companies still have time to rustle up extra resort hotel beds and aircraft seats. There is always the risk in these circumstances that one operator, tempted by the prospect of stealing a large chunk of market share, will flood the market with extra capacity and cause prices to tumble, particularly in the late-booking period - destroying its competitors' margins.
This year is likely to be different. The potential impact of 11 September was so serious that industry leaders were less willing to take risks with capacity. And now that Thomson and Thomas Cook - the market's number one and number three, are owned by large German industrial combines - they are less likely to play fast and loose with the size of their summer programmes.
Thomas Cook, with its tour operating arm JMC, is now considered less of a wild card in this respect after being bought by the Germans and given orders to concentrate on profits and efficiency - to raising margins from less than 1 per cent to a respectable 4 per cent.
And with Airtours and First Choice, the two remaining large players quoted on the UK Stock Exchange, now concerned more with profit margins and share prices than sheer bulk, they are less likely to step out of line. 'Everyone is very nervous. If someone breaks rank, prices will tumble, and it could be disastrous,' said an industry insider.
French-owned Club Mediterranée, popular with UK holidaymakers for its upmarket inclusive 'holiday village' products, was one of the first to confirm hard times when it announced last week that profits of around £40 million in 2000 had plunged to a loss of £43.5m in 2001.
As well as watching profit margins, bookings and prices, investors are watching for signs of further consolidation in the UK industry. At first this does not seem feasible: the top four operators hold around 75 per cent of the annual holiday market of 20 million packages. In the past five years they have swallowed up significant medium-sized or specialist operators such as Unijet, Tradewinds, Hayes and Jarvis, Panorama, Jetset, Manos, Aspro, Crystal, Neilson, Magic Travel and Club 18-30.
Thomson is top with around 24 per cent of the market, followed by Airtours with 23 per cent, JMC with 15 and First Choice with 13, according to ABTA. The next biggest is Cosmos, with around 5 per cent. No other company controls more than 1 per cent of the market.
When Airtours made a hostile bid for First Choice two years ago, the takeover was blocked by the European Commission competition authorities. An appeal by Airtours against the decision will be decided next month. If successful, it could open the way for a fresh assault by David Crossland's Lancashire travel giant on Gatwick-based First Choice - or even an agreed merger.
One City analyst said: 'The market in the UK is pretty cutthroat - you can see that in the wafer- thin margins. Putting Airtours and First Choice together would not harm competition, and I think Brussels would let a fresh bid through.'
Whether consumers and industry leaders are yet ready to shake off their mid-winter blues and give the City a boost is another matter.
