Travel companies should take a “hard look” at their cashflow over the next 18 months if they are to survive the challenges of a worsening economy.

The warning from Malcolm Preston, a partner at PricewaterhouseCoopers, came as he unveiled a raft of data at the ABTA Travel Convention concerning the likely purchasing behaviour of consumers over the coming months.

Preston said travel firms should ensure they have forecasted their cashflow until Christmas 2009 to ensure they can meet basic cost requirements if demand for products tails off.

If companies have not looked at their balance sheet in terms of cashflow they should not be in business, Preston argued.

Highlighting figures provided by Ascent MI, Preston said the amount of money spent on trip into 2009 would remain flat but would not drop below 0%.

However the number of trips would fall “significantly” by around 10% over the next two years, however the average price of a holiday is expected to increase.

Preston also pointed to a survey which indicated how much consumer confidence has plummeted in recent months.

In April 2008 the number of people thinking they had less money stood at 13%, Preston said. The figure dropped dramatically to 41% in June and is likely to continue falling.

Preston urged travel companies to focus on three core elements of their business over the next two years: ensure customer confidence is not damaged; watch the balance sheet; and motivate the workforce.

More news from the ABTA Travel Convention 2008.