| Journal: TWUK | Section: |
| Title: | Issue Date: 17/04/00 |
| Author: | Page Number: 13 |
| Copyright: Other |
As the market is becoming more oversubscribed, the major players are being forced to cut costs – who is likely to bear the brunt of rationalisation?
BIG COMPANIES buying specialists love to promise that they will not touch the structure of their prey.Anyone with any insight knows that’s rubbish. Words cost nothing and it’s a way of convincing the owner who is selling that he is not abandoning the staff that have helped him build up the company. Of course, there’s all the justification about how a larger organisation provides security and a future for those working in the company to be taken over. Well, if it’s all going to be so good then why doesn’t the owner who is selling the business retain a shareholding? The fact is, that the owners sell because they want to get out and do other things or retire. At least they should be honest about their motives.
I feel very sorry for the staff of Airwaves. Their plight is vividly reported in Travel Weekly on April 10. A disgruntled member of staff put it beautifully, saying: “We have served our purpose for Kuoni. It has got what it wanted and that’s an end to it. Everyone here is very shocked.”
Airwaves is but the first. Many others will follow as the majors are forced into cost cutting and rationalisation. Only the mass-market volume specialists who have been bought, whose products can be force fed through the multiple retail chains, will provide a real return for the majors, because they can put bums on seats. The more rarefied specialists will die a slow death because any incentive for the owner to remain is not included in the deal.
Mind you, these companies could not have sold at a better time. Like those investors that should have got out of dot-com investments last year, they recognised their companies were probably at their peak.
The market is now oversubscribed in a big way. Everyone is moving into each others’ markets, margins are being decimated and volumes are static because the same clients are being spread between more operators. The low-cost airlines are also wreaking a heavy toll and tour operators are at a considerable disadvantage because they are highly regulated, carry expensive bonds and are the kicking boys of the press and consumer associations.
We are all having to work harder for diminishing returns. Press editorial, once so effective, has lost most of its impact and advertising returns have dropped, though an increasing number of enquiries are coming through the Web because (and only because) we all advertise our Web addresses in our general advertisements.
This is not a healthy time for many of us in the industry. This period is here to stay for some time and not everyone will last the course. You can tell when trading is going to take a turn for the worse and that is when the insurance industry thinks, if one can judge by the low bond premiums being given out left, right and centre, that this is the time to pile into travel bonding and cut each others’ throats. They, too, are like lemmings.
Everyone has increased capacity to Greece this year because of the problems faced by Turkey.
As a result, both the quality of the clients and tour operator margins will decline. Any fool can sell volume at a loss.
The trick is to make some money out of the business you are in. So, all we can do is wait for the wheel to turn again.