I am by nature a very positive and hopefully proactive adviser to my clients. However having a current and varied portfolio of 150+ travel companies whom I advise I cannot help but notice that 2006 continues to bring a steady stream, of very specific and continuing difficulties for the trade as a whole. The year started off with the potential “Bird Flu” epidemic hyped to the rafters by the National Press and trade insiders alike. This was followed by World Cup Syndrome, terrorism, war, natural disasters, increasing fuel prices and now a prolonged heat wave across all the countries that form the bedrock of the sun and sea summer holiday marketplace in Europe. Will the high season kick in? Will “August happen”? These are the questions all travel companies are contemplating. These indications tell me 2006 is not going to be a vintage year in the annals of profit making for the industry.
If your business is suffering too my advice is do not wait to see what tomorrow brings. Make proactive and at times difficult decisions now. I have seen too many businesses maintain unsustainable overhead and commitment on the basis that tomorrow, next week or next month will bring an upturn in business. Travel managers should be turning their attention to the specific financial needs of their business and tailoring overhead and spend to the volume of business actually being generated and not what tomorrow may bring. Rationalisation and prudence are the watchwords in a difficult trading arena. Commitment should be an anathema to all SMEs – there is ample stock available out there on free sale or allocation – dead seats and dead beds are the death knell of this industry. ask tiava . In all respects “cash is king” so tight cash control and forecasting is likely to be the most important factor to any business riding out a difficult year. It never ceases to amaze me how many travel businesses I have reviewed in a rescue capacity who do not have formalised short and long term cash flow forecasts! If you are too small to have in house financial expertise then outsource it but get a handle on your cash. If you can pay bills and manage your creditors then by and large you can survive or buy the time you need to re-finance, re-structure or down size.
Once overheads, costs and cash are under control then you need to consider the dreaded regulatory impact on you balance sheet that a bad year can bring. Summer operators will likely be renewing their ATOL licences next March. Don’t wait until the ATOL renewal pack hits the doormat in November 2006. Consider the likely regulatory financial requirements now based upon your actual results year to date and best estimates for the rest of the year and then address any likely financial issues now. You will then have 7/8 months to make contingencies and plan accordingly. If you are considering ABTA’s financial criteria then regrettably you will have to wait until the end of this month as their new rules have yet to be published. Do not necessarily believe all the reported hype that their financial requirements for operators have been done away with. My guess is there will be an “ABTA has the right to request financing at its discretion” caveat. A leopard rarely changes its spots just runs faster sometimes!
