Holiday Pricing

Debate between Tobias Ellwood and Damian Hinds

Monday 24th February 2014 Westminster Hall

[Damian Hinds]

My hon. Friend makes a good point. The short answer is that such a measure would be welcomed by the travel business because it would extend the season, which would be good for capacity utilisation. There would be an effect, but the effect would not be nearly as big as many people anticipate. The season might be extended by a week or two, but those would still be shoulder periods. They would not be peak periods, so there would be a difference, but the difference would not be huge.

[Mr Ellwood]

My hon. Friend makes an important point on the responsibility of the tourism industry as a whole to ensure that it sets its prices accordingly, but I recall that during the Olympics there was a concern that many hoteliers in London increased their prices too much, which put people off. Does he have any thoughts on whether that should be rationalised for one-off events such as the Olympics? I recall wanting to stay in Manchester during the party conference, but as soon as hoteliers found out that the party conference might be held in the city, the prices suddenly shot up.

[Damian Hinds]

My hon. Friend is correct in identifying price gouging as a problem. From a regulatory perspective, most countries have laws against price gouging, but brand owners and companies have an interest in not doing such things. Even worse than the Olympics, price gouging can occur when there has been a natural disaster. People absolutely have to stay in a hotel, so they are ripped off. That is a bad thing, which is why rack rates exist. Rack rates appear on the back of a hotel door, and it is the maximum amount that may be charged in law. Most European countries, the United States and most advanced economies have that system in hotels, but price gouging remains a problem.

In summary, leisure travel companies have to make more money in peak periods to cover the marginal cost losses incurred during the off-season. The definition of a peak period is when most people want to travel, which is partly, but not wholly, determined by the timing of school holidays. I am interested to hear from the hon. Member for Chesterfield (Toby Perkins), but it is inconceivable that a British Government of any political persuasion would impose price controls on the British-based travel business. If such price controls were imposed, firms would go out of business—plenty of holiday companies go out of business anyway because margins can be thin across the year—and capacity in foreign resorts would not be made available to British tourists. Instead, capacity would be sold to people from other countries, which would have the disastrous consequence of more German towels on loungers, and we can all unite around wanting to avoid that.

What are the alternatives? I have spoken for too long, but I want briefly to address the debate on taking children out of school outside school holidays. I recognise the argument that times are tough and that people are struggling to go on holiday so want to take their kids out of school. One thing that has not yet come up in the debate is that education in this country is free, but that does not mean that education has no cost. The average cost of educating a child is some £4,500 a year, which covers 190 school days or 38 weeks. By my basic maths that works out at about £120-worth of value per child per week. If someone takes both their children out of school for a fortnight to go on holiday, £480-worth of value is forgone in the education of those children. That value cannot be transferred to the education of another child; it is value forgone for ever. The salary of the teacher and all the other things that go into running the school remain and the children miss out.

Children fall behind if they miss part of their education. In the context of a school term, even a week or two weeks is a reasonably big chunk of time. Multiplied over a lifetime, a child taking a fortnight out from school every year from year R to year 13 would be off for 28 weeks, which is three quarters of an academic year. To put that in physical terms, it is the equivalent of saying to that child, “You will do your GCSEs at the beginning of year 11 rather than at the end.”

What are the options? One thing that nobody has mentioned is counter-cyclical travel. If people go to places in the summer that have most of their demand in winter or in business periods, they can get quite a good deal. We have those places—in particular, business-focused destinations—in this country. Travelodge, for example, has hotels in many places and families can find lots of fabulous things to visit within 40 minutes of any of them.