Q. We are a family of four, including two girls of 12 and 14. Work duties mean we can only go away for a week in August. Where should we go?
A. Algarve. Buy now, because fares will only rise as summer approaches.
A few things happen at peak season. One of them is that the latest booked holidays cost more. This happened in 2012 and we are certain this will be the case again. If you are restricted to peak season, go somewhere where there is lots of supply; competition between airlines and holiday companies; and where the destination has a reputation for delivering on quality. Algarve fits all those conditions.
The big decisions about supply and demand are being made now. If you watch the travel agent's window or the home page of the sites of the big tour operators over the next few weeks you will get a sense of what destinations are doing well and what destinations they have trouble selling. Last year they had no trouble selling virtually every holiday.
Airlines and holiday companies are forever trying to second-guess what the consumer wants. They are offering the ultimate perishable product. Plane seats and hotel beds cannot be put back in to the freezer and sold again on Monday.
Sometimes they can get it wrong. They charter beds and planes in the hope of selling them at a good margin. Long ago the travel agent had the monopoly of tickets and information. Not any more. The real internet revolution for the traveller is not cheaper prices but knowledge.
Several factors determine the price of a holiday. Competition between tour companies can drive prices down. The number of charters to one destination can increase disproportionately, as happened to the Bulgarian resorts and in previous fast growing destinations such as Croatia and Sicily.
Smaller tour operators and travel agents who use dynamic packaging can compete and even beat the price of larger operators.
Scheduled carriers, usually Ryanair, can arrive on charter routes with extra flights, freeing passengers from the tyranny of being forced to travel on Saturdays and leaving charter planes with empty seats the holiday companies have to dump.
A little bit of uncertainty can leave airlines with unsold seats. A major incident can cause a collapse in demand – as happened during the Arab spring. Morocco, Tunisia and Egypt have not yet recovered. Places can go in and out of fashion. Last year's Dalmatian coast gets overtaken by this year's Ischia only to be, in turn, overtaken by next year's Puglia.
A third category of internet wholesalers, the big international websites, is also being used by hoteliers, airlines and holiday companies to sell off the spare beds and airline seats that don't look like they will otherwise be sold.
Finally, don't pay for extra luggage, because it will be so warm in August that you won't need much baggage.
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