UK's Golden Summer sees travel sector insolvencies double
The number of travel companies entering insolvency has doubled over the last 12 months, says Wilkins Kennedy LLP, the Top-20 accountancy firm.
86 travel agencies and tour operators became insolvent between October 1st 2011 and September 30th 2012, up from just 40 in the preceding 12 months.
Wilkins Kennedy says that travel agencies have faced an exceptionally tough 2012, as an unmissable UK summer of the Queen’s diamond jubilee and a home Olympics kept British holidaymakers at home.
Wilkins Kennedy adds that continued instability in popular holiday destinations such as Greece and Egypt also helped deter Britons from heading overseas.
Anthony Cork, Partner at Wilkins Kennedy says: “Summer 2012 had the feel good factor for most of the UK but unfortunately travel agents and tour operators have had little cause for celebration.”
“While the jubilee and Olympics were presented as a tonic to the double-dip recession, they actually compounded the financial problems in the travel sector.”
Anthony Cork continues: “A lot of struggling travel agencies needed an exceptional 2012 to help them keep their heads above the water, but the once-in-a-lifetime combination of a home Olympics and the jubilee put paid to that.”
“There were expectations of a spike in holiday bookings as Britons tried to ‘get away from it all’, but this spike either wasn’t as large as expected or it failed to materialise.”
“It looks like a lot of people took British Airways’ advice of ‘don’t fly, support GB’.”
Wilkins Kennedy adds that the effects of incentives to stay at home in 2012 were intensified by disincentives to travel abroad.
Anthony Cork explains: “Traditional holiday destinations such as Greece and Egypt have experienced a prolonged period of political or economic instability. The sunshine can’t make up for holidaymakers’ concerns about their personal safety.”
“Countries that would once be core destinations for travel agencies are no longer popular options with the public.”
Anthony Cork adds: “The added problem is the lack of certainty around how long Greek or Egyptian instability will last. This makes it very tricky for travel companies to make contingency plans or adjust offerings with confidence.”
Wilkins Kennedy says that a tough 2012 has followed a lengthy period of difficulty for the travel sector.
Major tour operator Thomas Cook issued profit warnings throughout 2011, and was forced to restructure in spring 2012 to avoid breaching banking covenants.
Recent administrations include:
The five-branch travel agency Enjoy Holidays went into administration in August owing creditors up to £1.2million
Astonbury, trading as Sky Jet become insolvent last year after the company had asked passengers on its flights to pay £23,000 to continue their journeys.
Shenoy & Co, trading online as Reliable Holidays and Economy Travels, went into administration with an alleged 2,165 advance bookings, despite having a licence for just 500 passengers. Its failure is said to have cost the Air Travel Trust (ATT) fund over £750,000.
More recently, Leicestershire holiday firm Bowen Travel Group entered administration in October 2012, with the loss of 400 jobs.
Anthony Cork explains: “Travel companies have had to adapt to a very difficult set of circumstances recently. Persistent high fuel prices have added to package holiday costs, while the nature of the sector has changed rapidly with the emergence of low-cost, DIY, online travel agencies that cut out the middle-man of the traditional high street vendor.”
“And of course, the travel sector has been hit very hard by the double-dip recession. Overseas holidays are often the last thing on peoples’ list of priorities in a difficult financial climate, or people trade down to cheaper holidays.”
Wilkins Kennedy adds that many travel agencies were able to scrape by during the first recession in 2008-2009 but the double-dip forced many firms already struggling over the edge.