Travel will not escape money market meltdown

Travel will not escape the short-term consequences of meltdown on the money markets and will face recession in the coming year.

That is the gloomy view of ABTA chief executive Mark Tanzer, a former management consultant, who said: “The situation is serious for everybody.

“The pressure on financial structures is bound to feed through and is going to reverberate through 2009. We just do not know for how long or how deep. A longer term squeeze on consumer spending will tighten things further. It is not looking great.”

The Online Travel Group joined the roll-call of failure at the end of last week, brought down by falling consumer spending and credit restrictions imposed by suppliers.

Administrator Neil Bennett of Leonard Curtis said: “The collapse was systematic of conditions generally. Times are tough for the industry and especially for small businesses. Margins are so small you have to be a volume business to make it.”

Bennett has worked in insolvency protection since the 1980s and said: “I have seen nothing like this. Money to help companies is just not there. There will be other businesses going to the wall.”

He expressed concern that consumers would opt for “larger companies they believe to be safe” rather than book with small businesses.

However, Tanzer said: “The industry has proved good at dealing with external shocks and underlying demand is strong. In the medium term we have a strong proposition.”

The demise of the Online Travel Group may signal wider problems with the web-only agency sales model. Its failure follows that of rival online agency Leisure Direction in February. Both specialised in trips to Disneyland Resort Paris.

A survey of 1,000 UK travel agencies by analyst Plimsoll found more than one in four are losing money and 188 have “a high chance of failure”.

Good news came in upbeat trading statements from industry giants TUI Travel and Thomas Cook and a deal to rescue Alitalia. But both travel groups stressed capacity reductions.

Hopes that Monarch Airlines might replace capacity lost by the failure of XL Airways were dashed by managing director Tim Jeans, who said: “The situation screams out for caution.”

The financial crisis also claimed one of the two owners of Stella Group, the Australian parent of Stella Travel Services. Investment group Octaviar, which has a 35% stake in Stella, went into administration last month.

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