Thomas Cook says package deals will be UK's austerity holiday of choice

The package holiday is back. With austerity measures biting and another tough year ahead, British holidaymakers will shun adventure in favour of the all-in deals invented by Thomas Cook in 1841.

So reckons the company's chief executive. After one of the toughest years the travel industry has ever faced, Manny Fontenla-Novoa hopes for better in 2011, though he knows his customers are still wary.

"There are a lot of negatives. Austerity measures mean that people are sitting there wondering, what does all this mean for me? Until that settles down, consumers will be uncertain," he said.

"The good news for us is that all surveys show that holidays are a really important part of people's lives. They protect it at almost any cost, but they want certainty. All inclusive deals will be popular."

He says Turkey will be the destination of choice for a week or two of sun, with Spain and Greece also coming back as hoteliers respond to the eurozone crisis with cheaper rates.

Today Thomas Cook reported annual sales down 4% to £8.89 billion. Profits slipped 6% to £391 million, a slide that has left the firm looking for cost cuts of between £40 million and £50 million.

Around 500 British back office staff will lose their jobs. The firm also said it would renegotiate supplier costs, reduce its buying requirements and upgrade its IT infrastructure. It expects the changes to cost £20 million to implement during the next financial year.

The group, which issued a profit warning in August, said in September that it would look to cut costs and streamline its operations in Britain to prepare for expected tough conditions next year.

The group is paying a final dividend of 10.75p, unchanged from last year.