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Small agencies face financial ruin

More than 50 small travel agencies face financial ruin due to the lingering impact of the recession, a study warns.

A further 163 are vulnerable to being taken over in a further round of industry consolidation as their finances are too stretched.

The effects of the credit crunch continue to bite hardest at the lower end of the market, according to the report by market analysts Plimsoll.

This is because smaller companies have not had the same facilities to ride out the recession as well as their larger counterparts.

“While large companies have relied on their size, brands and better access to cash, smaller companies have been left high and dry,” said David Pattison, author of the analysis into travel agents.

“We have given 53 small companies a ‘danger’ rating. While conditions have improved of late, I fear a high proportion will fail.

“Whereas large companies can call on banks and parent companies or cut out loss making parts of their operations, smaller companies are increasingly running out of cash.”

Small companies are struggling to maintain their market share and being squeezed out of the market.

Pattison said:  “196 small companies are selling less than last year. Clearly they have seen demand for their products dip or worse still, a new competitor has emerged. With their finances already stretched, they have little left in their arsenal to fight back.

“There are clearly too many small companies chasing too little market. The inevitable consequence is another round of consolidation with large competitors buying small companies at a discount.

“Of the 376 companies with assets of less than £3million, we have identified 163 companies as being vulnerable to takeover.”

The Plimsoll industry analysis on travel agents gives a performance rating on 789 companies.

• Readers of travelweekly.co.uk are entitled to a £50 discount of the Plimsoll Industry Analysis – Travel Agents. Call 01642 626400 for further details and quote reference PR/HP80.

 

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