Buying a holiday is a more complex matter for UK consumers than making most other purchases. The first purchasing decision to be made is whether to take a holiday in the UK or to travel abroad. The demand for overseas holidays has grown almost incessantly for several decades, a period in which the `domestic' half of the market has declined. In 2008, UK residents took an estimated 120 million holidays (around two per inhabitant), on which they spent £39bn. While the majority of holiday trips away from home were within the UK, domestic trips are relatively low in value, largely involving cheap leisure breaks to see family and friends.

The second purchasing decision is whether to buy a convenient package holiday or to travel independently, booking each element of the holiday separately. The sun-and-sea packages sold through high-street travel agents are well established, but the Internet has grown steadily in importance, helping consumers with some technological ability to book their own `dynamic' holiday packages.

Since the start of the current decade, independently booked holidays have increased their share of holidays abroad to nearly 60% of overseas holidays. For the independent traveller, a host of purchasing decisions have to be made — transport, accommodation, holiday activities, buying insurance, etc. — whereas the main decision for package holiday tourists is destination. Assuming they are going abroad, Spain and France are still the most popular, but the range of other significant destinations (e.g. the US, Greece, the Caribbean, Egypt or Scandinavia) illustrates the sophisticated choices made by the British abroad after two generations of travel.

The recession that started in 2008 and deepened in 2009 had an immediate impact on holiday purchasing. Key Note's consumer research found that a significant proportion of adults were considering saving money by staying in the UK for their holidays in 2009, while a quarter were worried they might not be able to afford a holiday at all. However, Key Note's overall conclusion is that the holiday market has come through previous recessions and the long-term growth trends will soon be reinstated, because holidays away from busy working lifestyles are now seen as `essentials', not luxuries.

The industry that supplies the demand for holidays abroad is in a strong position to help the market recover. Once extremely fragmented, tour operating and travel agency are now focused on two giant groups: TUI (including Thomson Travel) and Thomas Cook, both owners of airlines, travel agents (high street and Internet) and numerous holiday brands ranging from the mainstream to the ultra-specialist. The sophistication of these groups, both German controlled, is well suited to the growing sophistication of the UK tourist.