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There was a time when splashing out on a holiday was viewed as an optional luxury. These days, even in the midst of a recession, taking a break remains a top spending priority for many adults.

In recent years the domestic market has remained static - a situation not helped by poor summers. Meanwhile, the volume of overseas holidays has begun to level but expenditure is rising steadily. Mid-haul destinations, and those outside the Eurozone in particular, are more in demand.

Nonetheless, despite unpredictable weather and grumbles about inflated prices, the strength of the euro has made a holiday in the UK a more attractive option. This move toward spending time booked off work at home has even given rise to a new term: the 'staycation'.

As the popularity of all-inclusive holidays has risen, so the self-catering market has posted a slight decline in volumes. However, it seems likely that belt-tightening consumers will revert to self-catering options.

Families are the main demographic drawn to self-catering, regardless of the economic climate. The freedom to follow one's own timetable and culinary requirements is a major draw. In addition, it provides a more authentic experience for those looking to mix with the local community.

This sector covers all budget sizes: from Eurocamp and its canvas villages, to luxurious chateaux with a full complement of serving staff. However, it looks likely that the cheaper end of the market will be best-placed to benefit from an increase in those looking for a downsized break.

UK budget self-catering operators such as Hoseasons are looking forward to a bumper season. Hoseasons has said its domestic bookings are currently up 27% on 2008. Holiday-camp specialist Pontins, meanwhile, has recently announced a £50m investment to redevelop six of its UK sites.

This market is not just being affected by people's financial concerns. The environmental impact of holidaying has moved up the agenda for many. Those concerned about the carbon footprint of flying are more likely to stay at home during their holidays.

For some, traditional self-catering does not provide enough of a break, as they still have to shop and cook. In response, some self-catering operators have introduced extras such as welcome packs and private chefs.

When it comes to the leading players in this market, consolidation has left just two: TUI Travel and Thomas Cook. While the two companies are best known for their all-inclusive holidays, they have recognised the desire of many people to tailor their packages, and that includes self-catering.

There are also myriad smaller niche players, and the internet has opened up direct rentals. Companies such as Owners Direct, Holiday Rentals and Holiday Velvet have established themselves as online booking agencies for owners with properties to let out.

The variety of factors influencing the self-catering market can make it hard to predict trends. While the recession means cheaper domestic holidays may become more attractive financially, the unpredictable weather means that the many who want guaranteed sun will head overseas.

Similarly, although self-catering offers flexibility, one of the reasons all-inclusive deals have been gaining in popularity is that they allow for tighter control on holiday budgets, reducing the risk of unexpected expenses.

So, while the mainstream sector has been hit by a consumer shift to all-inclusive deals, luxury self-catering villas, such as those with swimming pools, are reported to be doing well. The predicted growth of ABC1s is good news as they are the demographic most likely to take a self-catering holiday.

Moreover, there are some indications that secondary or supplementary holidays may be being cut back with people concentrating on their main holiday. However, 38% of people still took three or more holidays in 2008, according to TGI.