The travel industry has changed radically since the 1970s, when two weeks at the English seaside were the norm and Mediterranean holidays were only just coming within reach of most families. Domestic holidays have survived, but these days most people holidaying in the UK are taking a short break of up to three nights and there has been a steady decline in the number of longer stays. Around 14 million UK residents took an overseas holiday in 1999 - around ten million in summer and four million in winter, and they spent, on average, £500 per head. Spain is the clear favourite for the British, accounting for 42 per cent of all package holiday bookings. But while the Mediterranean has remained strong, UK holiday-makers now travel to all corners of the globe. The advent of charter flights to the United States, the Caribbean, the Far East and Australia in the 1980s opened new markets for UK holiday-makers, as did a fall in the price of cruises and all-inclusive holidays.

The travel industry today

Today the UK, and indeed the European, holiday markets are dominated by a few major players. During 1997 the UK government conducted a wide-ranging review of the package holiday market, which was dominated by Thomson, Airtours, Thomas Cook and First Choice.

At the time, the first three of those companies were all vertically integrated, which meant they owned tour operators, airlines and travel agents. But despite their dominance, the government found that they operated in a highly competitive market and offered consumers good value for money. This was the signal for the main players to expand further and a rapid programme of consolidation began.

Airtours bought up Panorama, direct-sell operator Direct Holidays, and more recently Jetset and Manos. Thomson acquired ski operator Crystal Holidays and a raft of small independent operators. The idea behind the acquisitions was to try to convince holiday-makers that they were not only good for mass market holidays, but that they could cater for any type of traveller.

The big companies also wanted to make sure you bought from their shops and began a policy of acquiring high street travel agencies. However, when Airtours stepped in to buy First Choice in early 1999, the planned purchase was a step too far for the European Commission, which decided to investigate. The EC concluded that, even though First Choice shareholders wanted the deal, it should not go through because Airtours would then hold a dominant position in the UK market and this would, potentially, be bad for consumers. Although at the time of going to press Airtours was fighting the decision in the court of appeal, it became clear to the major players that any further expansion in the UK market would be limited. If they wanted to get bigger, they had to expand on a European basis.

Thomas Cook is already 51 per cent-owned by German giant Preussag, and Airtours has various interests around the world, including a 36 per cent stake in FTi of Germany. In April 2000, German's other giant, C&N Touristic, made an offer for Thomson, the UK market leader, which has had a troubled time since its float in May 1998. The reason for the mass consolidation is simply to give the big companies greater buying power when it comes to negotiating hotel beds in resorts and buying aviation fuel. The profit margin on package holidays from the UK is only around four per cent, but economies of scale can help push that up considerably. These increased margins are unlikely to be passed on to the consumer in the form of cheaper holidays. UK holiday-makers already enjoy prices that are, on average, around 40 per cent cheaper than their German counterparts and high street discounts of 30 per cent are commonplace.

More likely is that the increased consolidation will lead to reduced competition among travel companies and give them the opportunity to charge what they would consider to be more realistic prices for the holidays they offer. Medium-sized tour operators will find it increasingly difficult to contract hotel beds when up against the buying power of the European giants.

Elsewhere, low-cost carriers such as EasyJet, Go, Ryanair and Buzz have exploited the market for cheap European fares. Operating out of cheap satellite airports such as Luton and Stansted, they have been able to offer flights to European cities at a fraction of the cost of such main scheduled airlines as British Airways.

Surprisingly, the cheaper airlines have appealed to business travellers on a budget as much as to holiday-makers. However, they have largely steered clear from operating on routes to Mediterranean resorts, where they would have to compete with the charter carriers, which offer flights as part of a keenly priced package.

The three big success stories of the mid- to late-1990s have been Florida, cruising and all-inclusive resorts. Florida, with its theme parks, guaranteed sunshine and great value for money, has appealed to families that want an alternative to the Costa del Sol. Unfortunately Florida did not capitalise on its popularity by promoting the whole state, and many families chose to holiday elsewhere after they had visited Walt Disney and Universal Studios.

Cruising and all-inclusive resorts, which have been most prevalent in the Caribbean, have proved to be an increasingly popular option for stressed-out workers who want to recharge their batteries. On both types of holidays all meals and activities are provided, leaving holiday-makers with little to worry about apart from topping up their suntans. But the holidays have not been without controversy. Many Caribbean islands have complained that cruise ships, which stop off for the day, add little to the local economy because tourists largely keep their money in their pockets, returning to the ships for meals and drinks. Similarly, all-inclusive resorts are self-contained and many guests never venture out of their safe complex.

Future directions

The biggest changes in the industry will be in distribution, or the sale of holidays. The major companies have stopped opening new travel agency branches and instead are pouring millions of pounds into new technology. So far less than one per cent of package holidays have been booked over the internet, but the big companies are banking on this changing. Not only will consumers become more used to booking in this way, but the costs to tour operators will fall because they will not have to pay travel agents' commissions if they can get holiday- makers to book direct on their own site.

Commodity bookings, such as flights and hotels, have already been sold over the internet to great effect, and EasyJet claims that it is taking over 30 per cent of its bookings via its website. So far only five per cent of British Airways' flights are booked over the internet, but the airline believes the figure could be as high as 50 per cent within five years.

In the future, the new technology will simply give customers greater choice. You will be able to call up the internet from your mobile phone and surf to find the best deals. You may choose to book holidays from an internet travel agency that is offering a range of different holidays or you could log directly on to a tour operator or airline site and book with the company itself. Alternatively, you will be able to see and speak to a travel agent on your phone who will carry out all the searching for you in return for a service charge or fee. A similar function will be available on television and people will be able to make bookings or call up an agent on the screen.

High street travel agencies won't disappear because there will always be people who want to talk face to face with an agent and enjoy the social experience of shopping. A peak-season Mediterranean holiday to a good standard hotel currently costs around a £1,000 per head, and for that sort of money many people want a chat with a friendly face they can trust. But, to survive, agents will have to offer a personal service and innovative ideas to capture the imagination of the public, and the new technology will undoubtedly weed out the worst retailers. Currently there are around 7,000 UK agents, and this is expected to drop to around 5,000 over the next five years.

A new development in towns is the holiday 'hypermarket'- huge warehouse-style agencies where people can practice driving on the other side of the road, and watch videos and relax in the comfort of a coffee bar. The idea was borrowed from America, where mall shopping is popular. Although it was slow to get off the ground in the UK, and bookings during the week are often poor, the hypermarkets have done good business at weekends.

The quality of holidays has improved beyond all recognition over the past 20 years and this trend will continue in the future. Programmes such as BBC's Watchdog have made people more aware of their rights, and it is no longer acceptable to offer holidays that do not fit the brochure description. However, the choice of holidays on the market is set to diminish as the big players continue to grow. Although the internet provides a relatively cheap form of distribution for anyone starting out as a tour operator, the real problem is gaining content, or hotel beds, in a resort. Most of the available properties in traditional hot-spots have already been snapped up by the big boys.

Futuristic travel

Talk of the future always sparks images of space travel, but in reality it would take a huge change in the cost of these trips for any family to even contemplate donning silver suits and travelling to another world. A Bristol-based company has offered trips on a space shuttle, but places are very limited and you won't get much change from £30,000 a head. Although the quality and types of holiday on the market and the way in which they can be bought are constantly changing, such old favourites as Spain, Greece, the Far East and Australia are set to remain popular for many years to come.