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MARKET COMMENT
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Whilst travel pundits were busy watching the conflict between the budget and scheduled airlines, another struggle was raging elsewhere in the travel sector. This was the battle between the no-frills airlines and the package tour operators. That contest claimed its first victim only a few weeks ago when MyTravel (LSE: MT.) confessed that it had misstated its accounts. The tour operator has seen its sales decline too. The budget airlines, which include easyJet (LSE: EZJ) and Ryanair (LSE: RYA), have been pinching customers not only from the full fare national carriers but also from the tour operators. Former fans of package holiday have realised that it is possible to travel economically to holiday destinations by booking flights and hotel accommodation separately. Internet sites, such as those operated by Lastminute.com (LSE: LMC) and ebookers (LSE: EBR), have benefited from this shift away from package holidays. The budget airlines now offer flights to popular holiday locations spelling tough times ahead for the tour operators. MyTravel tried to react to the success of the budget airlines by launching its own no-frill airline. But tour operators need to wake up to the competition that is taking place right under their noses. Some operators have produced customised holidays as a possible alternative. These are pick-and-mix offerings that provide a basic package with optional extras charged at premium prices. This is not a tactic that will endear the tour operators to its customers because a package holiday, as the name suggests, should be all inclusive. The MyTravel debacle is just another example of the competitive rivalry that exists within any industry. However Holidaybreak (LSE: HBR), the camping and mobile-home holiday specialist, today showed that the niche holiday market was still alive and well. The owner of Eurocamp posted a 14% rise in pre-tax profit to £27m on sales that rose 14% to £219m. The big travel operators need to take a leaf from Holidaybreak's holiday brochure if they are to avoid further deterioration to their businesses. Diversity of choice is what the UK consumer is calling for. More of the same will just not do and they will need to react swiftly if they are to avoid total annihilation.