Regulators are stifling innovation and start-ups in the travel industry, leading industry accountant Chris Photi told the Abta Travel Convention in Palma today.
The senior partner at Whitehart Associates said there hasn’t been the level of innovation previously seen when low cost airlines, bed banks and component suppliers previously entered the market.
“All benchmarking surveys tell us that your clients want to travel more and more but in recent years I would question have we been seeing the innovation we saw at the start of the ‘noughties’. I believe a lot of innovation is being stifled by the regulatory restrictions on start-ups.”
Photi said another hampering factor for the industry was the City’s view on travel as a sector incapable of delivering shareholder value.
He said even though the mergers of the big four in 2007 saw hundreds of millions of pounds worth of synergies realised Thomas Cook and Tui Travel’s share prices barely budged.
This is an issue for the wider industry, Photi claimed, because it means financing for mergers and acquisitions is harder to come by.
A mixture of travel’s exposure to geo-political upheaval, the fact that travel is a discretionary spend, poor quality of management and the need for huge capital outlay all worked against travel.
Painting a concerning picture for the prospects for the sector in a weak economy, Photi warned traditional patterns of trading had changed.
He said previously when he was brought in to save failing firms he could rely on the predictability of booking patterns and limp a company through to a period when the cashflow would return.
“Simply, travel is a discretionary spend therefore an adverse economy is going to cause you problems. Today it’s very difficult to plan booking patterns,” he said.
Other changes in the relationship between agents and suppliers were also a threat, Photi added, with moves to get consumers to pay suppliers direct as in the US potentially “changing the whole dynamic of the business model”.
Agents should carefully nurture their relations with suppliers, he advised.
Other challenges facing the travel industry were the looming Flight-Plus Atol reform, the VAT position of many firms and relations with merchant acquirers and insurers.
Photi said Flight-Plus will undermine the status of many travel agents and Her Majesty’s Revenue and Customs will continue to pursue firms for unpaid VAT despite losing the Medhotels tribunal case.
However, he ended on a positive note: “Once we stop dragging along the bottom and come out of recession we will come out of it like a bomb.”