Thomas Cook, Europe's second biggest travel firm, said UK bookings had slowed as cash-strapped people, grappling with the government's fiscal squeeze, sacrifice their annual two weeks in the sun.
'Cumulative summer bookings remain ahead in most markets, although the rate of booking intake has slowed noticeably in the UK as a result of continued economic uncertainty,' the company said today.
Thomas Cook said cumulative summer bookings in Britain were 1% ahead of last year, sharply down from growth of 6% when the group last updated the market.
British consumers have been increasingly unwilling to spend as muted earnings growth and higher inflation, fuelled by January's rise in VAT and hikes in oil and food prices, bite into real incomes. They are also worried about job losses and welfare reductions related to government spending cuts, as well as the prospect of higher interest rates.
Historically Britons have been reluctant to give up their hard earned summer holiday even when they are cutting back in other areas.
Peter Long, chief executive of Europe's biggest tour operator, TUI Travel, which is majority-owned by German company TUI AG, said demand for annual holidays was proving resilient. TUI Travel will give an update on its trading performance later this week.
Thomas Cook said today that cumulative summer bookings were up 4% in Central Europe (Germany, Austria and Switzerland), up 11% in Northern Europe, but down 1% in West/East Europe. Average selling prices were up 4% in Britain and up 3% in Central Europe.
In response to the continuing tough British trading environment, Thomas Cook has reduced capacity to around last year's level.
The company also confirmed last month's forecast that unrest in Egypt and Tunisia would wipe around £20m sterling off second-quarter profit. 'Overall the business is performing well, given the disruption caused by the unrest in Egypt and Tunisia,' said chief executive Manny Fontenla-Novoa.
TUI Travel's Long had said yesterday that the group would factor in a hit of up to £40m each year from natural disasters and conflicts, having also seen its bookings hit by North Africa's political unrest.
