TUI Travel boss Peter Long said the owner of First Choice and Thomson had seen average selling prices rise by nearly 13 per cent this year.

“Around 6 per cent is down to higher costs,” said Long, “but the rest is customers trading up to a better holiday — deciding to go for the all-inclusive package rather than the self-catering one, for instance.”

He said Thomson’s new luxury brand, Sensatoria, had also enjoyed strong sales. 

Underlying profits rose by 39 per cent to £65.4million on revenues up 9 per cent to £3.6billion for the third quarter to June. The shares fell 5p to 223p.

TUI has been slashing the number of holidays it will offer for this winter and next summer.

Long said this was not because of the downturn but the result of the merger between Thomson and First Choice.

The company is still cutting unprofitable routes.

TUI is seeking small, bolt-on acquisitions, particularly in specialist areas such as activity holidays.