Travel agents who have enjoyed the upsurge in the cruise market over the last few years must take steps to ensure they are “keeping a tight ship” during the economic downturn, an industry expert has warned.
Addressing the Association of Cruise Experts UK Cruise Convention this week, Andrew Burnham, head of travel and leisure team at accountancy firm MacIntyre Hudson, said cruise had been in double-digit growth for two years – in 2008 it increased by 11% – and although it is niche, accounting for just 3% of the leisure travel market, it had outperformed the economy as a whole.
“However, it cannot operate in a vacuum with the current economic background,” said Burnham.
There are danger signs, he said. “There has been a 32% increase in shipbuilding. The industry has upped the ante, with new lines and a 20% increase in capacity. With 11% compound growth, that’s fine but there will be a flattening out of the market, and cruise could slip into the doldrums,” said Burnham.
The sector is also at risk because of its reliance on multiple cruisers – 59% of the market are defined as such, and it is easy for customers who usually take more than one cruise to drop one of them.
Although times will be challenging, cruise may see flat growth rather than a decline. “The message is: ‘Keep a tight ship’. There will be squeezes on margins, so get your ship in order and don’t build on false assumptions,” said Burnham.
“Travel agents need to gain market share and maintain their profitability with high margins and a new business plan.”
Rework the business plan – ‘Fail to plan and you plan to fail’
• Use cautious sales forecasts to test your sensitivities
• Identify and focus on higher-margin sales
• Develop cash flow monitoring systems
• Review all costs and settlement arrangements
• Align your staff goals with those of the business
• Consider funding and financing requirements
• Reshape your business to fit your realistic forecasts for sales