Travel agents are working to mitigate rising costs from next month amid a warning 2025 could be “tougher than any year since Covid”.
Blue Bay Travel chief executive Alistair Rowland suggested agents needed new revenue streams to grow sales by 10% – the amount costs are expected to rise this year as a result of the combined impact of changes to National Insurance contributions, the national living wage and business rates.
From April, employers’ NICs will rise by 1.2 percentage points to 15% and the threshold at which firms pay NICs will fall from £9,100 to £5,000 while there will be a 6.7% increase in the national living wage. Business rates relief reduces from 75% to 40%.
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Rowland, also Abta chairman, said: “I think 2025 is going to be tougher than any year since Covid. Most businesses will need to do something different because it’s unlikely they’ll grow their profits by 10% naturally.”
Agents said they had taken action.
Althams Travel plans to halve both the number of apprentices recruited, usually 15 annually, and the planned annual salary rise, but said refurbishments would continue.
Managing director Sandra McAllister said: “Costs are escalating at a rate I haven’t experienced before. It is quite tough out there and I think all retailers are feeling it.”
She added: “We are looking very closely at our costs. Our expansion plans have not yet been affected, we will monitor how the rest of this year goes.
“Business is good and it is just a shame that the profit margins are being watered down with current conditions.”
The Travel Network Group estimated the extra salary costs for just one employee in the 2025–2026 financial year would require an agency to sell seven more “averagely-priced” holidays.
Membership director Stephanie Slark said members had factored in the April cost rises into their business plans.
She said: “Many are reviewing overheads and streamlining operations – such as renegotiating provider contracts – according to their specific business needs.
Some members are renegotiating energy and water contracts or moving to a paperless environment.”
But she added: “Members will continue with their plans to expand, whilst other members will adjust their timelines.”
The Advantage Travel Partnership head of business development David Moon said the consortium was discussing with members ways to boost revenues, such as increasing ancillary sales and foreign exchange, but said agents remained optimistic.
He added: “A number of members have acknowledged the imminent hit to the bottom line from increasing costs, and whilst it will mean less profit, it’s not overly challenging them.
“Many of our members are continuing to invest, either through diversification or expansion, whilst keeping their staffing levels as lean as possible. We know of members investing in technology to increase efficiencies and productivity.”
Technology provider Travelgenix said 57 new agents had become clients since last year’s budget. One of them, ski specialist Get Me To The Alps, said it had to “leverage technology to offset growing costs”.
ArrangeMy Escape general manager Jennifer Lynch said the agency planned travel fairs but not investing in sponsorship deals or recruitment. “We’d love to have more staff but we are in a situation where you have to make do,” she said.
Bailey’s Travel owner Chris Bailey stressed the NI rise would “not make a huge difference to us”. He said: “It will have an effect on agents but doesn’t mean we’ll all go belly up.”
Spear Travels managing director Peter Cookson called the rises “another challenge” for the sector but insisted they “certainly won’t stop us recruiting”, adding that “finding staff is the problem”. The agency went ahead with its 4% pay rise in January.
He added: “We are just about to relocate our shop in Helmsley, North Yorkshire to a much bigger premises which underlines our belief in the future or travel.”