The hon. Lady is correct that the rises coincide with school holidays. To some extent, the existence of those holidays creates those spikes, but the holidays themselves coincide with the high season. As I outlined earlier, the prices for holidays marketed to couples, older people, singles, groups and clubbers typically go up in late July and August because that is the most popular time of the year, particularly to visit European, sun-based resort destinations.
This debate is no place to start deconstructing the profit and loss accounts of holiday companies, but contribution to profit is a key concept. I will talk about hotels, but the same logic applies to airlines and other travel products. The direct marginal cost of someone staying in a hotel room is rather low. Globally, the figure is somewhere between $15 and $20. That is the cost of laundering towels and sheets, issuing soap and providing heat, light and power, and so on. On one level, a hotel will make a profit if it charges anything over $20. The problem is that there are other, fixed costs. For an airline or hotel, the biggest fixed cost is the building or aircraft—loan repayments do not go up and down. Taken together, the cost per night goes up from $20 to, say, $100, which is a big difference. In the off-season, a hotel room might be sold for $80, $70, $60 or $50 a night. In other words, a hotel might deliberately make a loss. Why would a hotel do that? It does it because as long as it charges more than $20 a night, which is the direct marginal cost, it is contributing to profit. If a hotel tried to charge the $100 profitable rate, it would not sell the room.