01 January 2012
41 tour operators and travel agents go bankrupt in the last year
- 33% increase in Air Travel Trust Fund’s deficit shows impact of insolvencies
Forty-one tour operator and travel agencies have gone bankrupt over the last year, according to Wilkins Kennedy, the UK’s 21st largest accountancy firm.
Wilkins Kennedy says that the travel industry has been hit hard by the combination of the recession, natural disasters in Asia and the Arab Spring, which have all impacted bookings, especially to popular package destinations such as Thailand, Egypt, Tunisia and Morocco.
Comments Anthony Cork, Partner at Wilkins Kennedy, Restructuring & Recovery: “With Thomas Cook in financial difficulty and a number of major tour operators, such as Holidays 4 UK and Dream Holidays, ceasing trading over the last few months, the travel industry is clearly suffering.”
“Lower real incomes as a result of higher inflation have greatly impacted consumers’ discretionary spending. Rising unemployment is also causing many to worry about their job security, so they are holding off booking their holidays or downsizing their holiday plans.”
Wilkins Kennedy points out that the events of 2011 have heightened the impact of a longer term trend for travellers to book holidays direct over the internet, leaving tour operators and agencies with an outdated business model. More people are opting for a ‘do-it-yourself holiday’, where they arrange each aspect of their trip individually to help reduce the cost or simply get the itinerary they want.
Anthony Cork adds: “The internet has turned the traditional tour operators’ business model on its head. People are increasingly confident in booking their holidays online. Rather than booking a fortnight away from a catalogue months in advance, they use low-cost airlines and wait for last minute special-offer hotel deals.”
“To survive, travel companies need to capture the growing online bookings market with better deals, more flexibility, and more differentiated services to ensure they attract more of today’s increasingly savvy holiday-makers. Many of these high-street agencies operate with high overheads and the fall in sales has hit their profit margins hard.”
Increase in Air Travel Trust Fund’s deficit shows impact of insolvencies
The Air Travel Trust (“ATT”) Fund is the primary source of funding when an Air Travel Organisers Licence (ATOL) holder fails. It gives comprehensive protection to holiday-makers from being stranded abroad or losing money when purchasing flights and package deals including flights from licensed tour operators. If a licence holder fails, the Civil Aviation Authority (CAA), which administers the Fund, is responsible for ensuring holiday-makers are either repatriated or receive a refund.
The Air Travel Trust reported an increase of 33% in its Fund deficit to £42.3 million in its latest Annual Report and Financial Statements (year ended 31 March 2011) – compared to £31.8 million reported last year.
Anthony Cork comments: “The state of the Air Travel Trust Fund shows just how costly it can be when big firms fail. [There is pressure on the Civil Aviation Authority (CAA) to increase its £2.50 levy on all package holiday bookings, in order to help the fund restore financial stability].”
“It is inevitable that if there continue to be more insolvencies within the industry, the levy will increase. Travel companies will have to raise their prices to reflect that, making it even more expensive for their customers to go on holiday.”
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Nick Mattison or Fay Israsena
Mattison Public Relations
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