Firstly more people are booking all inclusive,

Secondly if the euro collapses then I think holidays would be the last thing on most peoples mind s

Euro collapse

If tour operators are still to pay for there holiday, it could increase the cost of holidays in europe

Holiday prices pre Dec 2011, 2 Weeks H/b Italy £1000
Holiday prices after collapse...Jan 2012, 2 weeks H/b Italy £1500

no Joe, if the Euro collapses the price in pounds will go down. But that assumes that nothing else changes which is unlikely. If a currency collapses it will probably cause an inflation jump which will put the local price up so converting it back to Pounds may not leave any difference - which is logically what should happen in a fair exchange rate market. But if the Euro based hotel or airline is stitched up in a deal it can't get out of then a currency collapse and inflation jump may cause it to go bust. You can't base a trend on the price of one holiday because you don't know whether the price increase is genuine or just one hotel taking liberties. One reason why Italian packages are getting dearer is that the demand is dropping so the overheads are rising - and of course less competition in the market means the operators who still go there can raise prices.

What you are likely to notice when you get there apart from higher Euro prices (so no saving on Pound conversions) is reduced public services, so less street cleaning, public transport etc. Plus closed down businesses so maybe fewer places to go.

There is big issue in package tours (and flights) which is not the euro but the pound/dollar rate and the oil price. Even if you fly from UK to Italy the fuel is priced in dollars. Airlines tend to hedge prices in advance so when a deal runs out the cost can leap rather than gradually grow. This time last year crude oil was around $75 a barrel, now it's about $114, in that time the pound has improved sligtly against the dollar but even so that's a jump from about £49 last September to £72 a barrel now. So when hedge deals run out an airline working in pounds is going to get a big kicking, but not as much as one working in euros! True, the actual fuel price isn't exactly pegged to the crude oil price because refinery and delivery costs won't have jumped by the same % but even so we've got to be looking at airfare rises for next year. And because the big UK bus and train operators who use loads of diesel also hedge a year in advance it's not just holiday fares that will go up!