ONLY a true curmudgeon would fail to feel any sympathy for Ron and Gwenda Bennett. The Dorset couple were forced to cancel their plans for a dream £9,000 cruise last week after the holiday company that organised the trip imposed an £892 fuel surcharge that they were unable to afford. The Bennetts pulled out, forfeiting their £900 deposit.

Stories like this one still seem to be the exception rather than the rule, but the City is beginning to think that the tour-operating industry is heading for a fall.

Last Thursday Mark Brumby of Blue Oar Securities, one of the closest followers of the holiday business, took his red pen to profit forecasts for Thomas Cook and TUI Travel.

At the former, he cut 2009 forecasts by 4% and pegged back expected profits in 2010 by 5%. There was another setback for Thomas Cook a day later when it pulled a proposed merger between its Condor subsidiary and Air Berlin. At TUI, Brumby cut profit expectations for 2009 by 2.4% and those for 2010 by 4%.

Such a stance looks prudent in the current climate, but the big question is whether consumers are really going to sacrifice their summer holiday in a bid to cut outgoings if a recession starts to bite?

Both Thomas Cook and TUI have remained resolutely optimistic, despite watching their shares decline 35% in three months.

The pair have been savvy at cutting capacity to ensure there is little excess in the market and say bookings remain buoyant.

There are good reasons to look on the bright side. A family holiday on the Costa del Sol can still work out cheaper than a UK break.

According to an AA survey, though, one in five Britons is planning a driving holiday to save money, a baffling way to try to economise given the rising fuel price.

Of course, Thomas Cook and TUI are not immune to fuel costs either. Higher prices will be a feature of their 2009 brochures. Nor is the euro moving in a favourable direction against the pound.

As with the argument against a housing crash, unemployment is the key. Unless the jobless total moves up significantly, most average families will continue to regard their annual summer break as sacrosanct and resist following the lead of the Bennetts.

The danger is that a sustained downturn will hasten the structural changes the holiday firms face. Just as with the newspaper industry, if cash-strapped tourists follow advertisers online in pursuit of a better deal, they may never return when economic conditions perk up.

Ithaca Energy

THE divergence between the soaring price of oil and falling investor interest in the small caps that extract it should present some opportunities for value. That, at least, is the theory.

Ithaca Energy, a small North Sea oil producer, last week rejected an unsolicited offer from Endeavour, a US group, claiming that the £160m bid undervalued it. Such a conclusion looks a stretch.

The company generated no turnover last year, while a cash pile that in January stood at £48m has dwindled to just about £8.5m in six months as drilling expenses have piled up.

Ithaca does have its believers. Five banks agreed last Friday to a £121m package that allows it to complete its acquisition of the Beatrice oil field from Talisman Energy, a loss- making project producing only 1,800 barrels per day. The rest of the money will be used to help bring nearby fields into production.

If all goes well, Ithaca could be producing 22,000 barrels per day by the end of 2009. The trick, of course, is getting the black stuff out of the ground.

Oil is an expensive business and Ithaca is a small fish — not one for the faint-hearted no matter how high the price per barrel.

james.ashton@sunday-times.co.uk

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