Travel companies struggling with legacy systems and reliant on traditional routes to market are being too risk-averse about investing in technology to find new customers, WTM delegates heard.
Speaking in a panel debate at WTM today former Hoseasons chief executive Richard Carrick said: “They [businesses] are very worried about making the sort of investment [Lord] Digby [Jones] was talking about.
“Their biggest challenge at the moment is keeping their heads above the water, a lot are not making an enormous amount of money and they are finding things tough dealing with legacy business models, old technology and traditional ways of getting to market.
“Their biggest single issue is how to grow their business by acquiring more customers. Those dependent on old fashioned distribution where you have got a lot of upfront costs are very reluctant to make the decision to invest.
“There are more of that type of people very, very scared of taking the risk in the current climate. Whereas online businesses have a lot less upfront costs and they are beginning to grow at the expense of the more traditional businesses.”
Travel Counsellors managing director Steven Byrne said: “There are massive opportunities for SMEs generally. If they are privately owned they can probably think quicker, act quicker and be more entrepreneurial than larger corporate enterprises.
“SMEs have a great opportunity at the moment. The old fashioned models are not working. The UK travel industry is becoming almost paranoid about consumers who want price but actually consumers want value and that’s about the level of service you provide. That’s the opportunity.”
Byrne said it was tough running a business in a recession but that as competitors fail opportunities arise and firms had to make sure they are being run as well as possible and have the right staff.
Chris Lee, head of travel for Barclays Corporate, said travel firms had adapted well to the changing economy, particularly in relation to things like low interest rates which has stripped them of a revenue stream.
“That has really focussed people’s minds to really look at the costs in their businesses, looking at their staff and all the different expenses. That was not necessarily the case with many of them before.”
Lee used the examples of Southall Travel and Travel Republic as two companies that had entered the market since the Barclays travel division was set up six years ago to become major players with multi-hundred-million pound turnovers.
Carrick said there was plenty of cash and private equity interest in travel and he knew of four or five equity houses that had targeted travel as an investment opportunity.
And he said businesses looking to move forward should look to take external advice in the form of a non-executive member on their board.
“I would encourage small and medium sized businesses to take someone on. You can take people on a little or no cost if you are prepared to give away a little bit of equity.”
- More from World Travel Market at travelweekly.co.uk/wtm2010