Small and medium sized travel firms are concerned about investing in the future because of concerns about the economy and their relationship with their banks.
A panel debate of industry bosses debated the current outlook for smaller businesses in the travel sector after a World Travel Market keynote speech by former government trade envoy Lord Digby Jones.
Lord Digby Jones said: “At this moment in time if you are a small business you have an enormous reluctance to go back to your bank because you have won through the recession,” he said.
“Your bank has probably asked for money back and made it more expensive [to borrow]. One of the things we have to do is re-establish the bond of trust between the smaller businesses and the banks.
“The reason smaller businesses are not borrowing was because they were shafted. You cannot make a bank lend if people do not want it. I’m not at all optimistic about we get small businesses back into the capitalisation game.”
Chris Lee, head of travel for Barclays Corporate, said he agreed with Lord Jones but said Barclays was willing to lend and that approval rates for loans were currently running at 80% within Barclays Corporate.
“What we need to establish is that it’s a two way thing, firms need to establish close working relationships with a bank.
“The key is getting a close regular dialogue with them. There is certainly a reluctance to borrow, people are cautious.
“It depends on what you are borrowing money for. Travel is not debt laden industry. We only lend to one third of our customers.”
Jones said companies had to stop seeing banks as some sort of pawn broker. He said many small businessmen fail to understand why a bank refuses to lend to them even if they offer their house as security.
“They [the banks] are there to make money out of lending money. They are not there to put you out on the street.”
Lee said credit card firms had reassessed the industry in the light of recent failures and were more aware of the risk they had underwritten and had changed their models.
Ian Oakley-Smith, partner at PricewaterhouseCoopers said: “The travel industry is to be applauded for avoiding any large scale failures.
“The ones that happened can be pretty much identified by their own specific internal circumstances. By and large the industry has been largely untouched but has spent a lot of time absorbing the issues.
“The challenge, I think going forward is how does it find the confidence again against a very volatile background to expand and borrow money.
“There have been so many external variables that actually trying to invest in a medium term basis has been very difficult.”
- More from World Travel Market at travelweekly.co.uk/wtm2010