Youtravel.com took more than 30 agents and suppliers to Crete last week. Michelle Perrett listened in as an expert panel discussed failures, markets, and ABTA’s bed bank proposals
The panel
- Jason Dwyer, managing director, Bookableholidays.co.uk
- Anthony Martin, managing director, Rock Insurance
- Matt Todd, sales manager, Qwerty Travel
- James Clarke, general manager, Thisistravel.co.uk
- Steve Clark, director, Travel Trust Association
- Tom O’Connor, senior sales director, Travelzoo
- Neil Herbert, sales, marketing and distribution director, Travel Buddy
- Paul Riches, sales and marketing director, Youtravel.com
- Liz Garfield, national sales manager, Youtravel.com
‘Unprecedented’ failures
A combination of difficult trading over the summer and cash-flow problems will bring about an unprecedented level of company failures by the end of the year, Rock Insurance managing director Anthony Martin said.
The problem is even more pressing as operators tried to renew their ATOL licences.
“I think there is going to be an unprecedented level of failures in the next four months. If the late-booking trend stays, there is not going to be the necessary cash flow available to survive,” Martin added.
Youtravel.com sales and marketing director Paul Riches argued it was too early to predict the future, but agreed the omens were not good.
“We can all sit here and talk about trading, but no one knows what will happen next. There were some failures in the summer when you wouldn’t expect anyone to fail,” he said.
Travel Trust Association director Steve Clark agreed that more agencies would fail. He predicted that some operators would be forced to cease trading if they were unable to renew their ATOL licences in September.
He said: “Large operators will get through this, but will medium-sized ones?”
However, the situation is not entirely bleak. Agents who think more creatively are likely to survive the continuing impact of the recession on the high street.
Travel Buddy sales, marketing and distribution director Neil Herbert said: “Retail travel has got to add value to transactions. If it doesn’t, it is going to go under.
“Differentiation will be key to survival. It doesn’t have to be a price differential, but a service differential.”
Qwerty Travel sales manager Matt Todd agreed it was time for agents to look at ways to improve business. “A lot of agents are just doing the same thing, but it’s time to change.”
Youtravel.com national sales manager Liz Garfield said following a number of operator failures over the past 12 months, agents should be wary of putting all their eggs in one basket.
Thisistravel.co.uk general manager James Clarke agreed that agents need to vary the product they offer, particularly those who focus on niche products.
“If you are a specialist and have not sold outside that arena, you are going to have problems. It’s going to be tough for the next few months,” Clarke said.
The 2009 market
While trading has fluctuated this year, the autumn half term and Christmas period could provide a boost after sales decreased in September.
Clark said: “The first quarter of the year was down. Business was good until a few weeks ago. People are booking increasingly later, so hopefully we will see business return for half term, Christmas and New Year.
If anyone comes out on a par at the end of the year, they have done well.”
Clarke said the problem was compounded by consumers booking late, as the majority of people book between two and three weeks before departure.
He added: “We had a strong May and June, but July was not as good. Turkey and Greece held up, but trading dropped off in September.”
Todd admitted the market was unpredictable. “One minute trading would be strong, and the next there would be nothing.”
Riches said the bed bank market reported similar sales volumes to last year, mainly because of a late sales surge for June, July and August. The average sales value was up 12% on summer 2008, partly because of the weakened pound against other currencies, particularly the euro.
“Margins were much the same – slightly up,” he added.
Bookableholidays.co.uk managing director Jason Dwyer said his company had increased revenues by 25% this summer, although profit remained low because of sterling’s poor exchange rate.
Tom O’Connor, senior sales director of holiday deals website Travelzoo, said it had changed business practices by tightening credit terms with advertisers.
The 2010 market
The message for 2010 was similar to this year, as price-driven customers continue to book at the last minute.
Although there are signs the UK may be coming out of the recession, unemployment and financial concerns will continue toworry consumers. They could also be distracted by the football World Cup in South Africa and a general election.
Todd said: “I don’t think 2010 will be much different to this year – we are still going to be chasing business.”
Job security and unemployment would continue to have an impact on bookings, according to Clark.
Clarke agreed: “Everybody would focus on a general election and people would probably delay booking.”
Herbert said the move towards short breaks would continue, especially for the over-45s, who are going to be more careful because of financial concerns.
On the dynamic packaging market, Clarke said traditional operators were more aggressive with pricing and cornering exclusive product, which he expected to continue in 2010. This will take some product away from agents wanting to dynamically package.
However, Clark said agents could still survive, as operators are offering better prices and commission as they recognise the importance of agents on the high street in the recession.
Financial protection
Agents and suppliers agreed that ABTA’s proposal to enforce principal status on bed banks was ineffective, and argued that the association should steer clear of the matter.
Clark said: “ABTA is a great membership organisation. It should hive off consumer protection, and let an outsider undertake a risk assessment.”
Riches said: “Of the four or five bed banks that shoulder the market, we should be able to come up with a solution.”
Herbert said: “ABTA does a lot of things very well. But it can’t be all things to all men.”
Clark added: “I think ABTA is looking at moving the goalposts. ABTA gives a licence to trade, but what does that licence mean?”
He called the ABTA proposal to make bed banks liable for consumers’ money in the event of a failure an “absolute nonsense”.
“I don’t think the proposal works. If I was a bed bank in ABTA, I would leave.”
No doubt this will be one of the many key issues debated at The Travel Convention in Barcelona next week.