Travel and tourism pulse report
Travel and tourism: time for take off
Risky business
What, if anything, do you consider to be the biggest risk to your business in the next 12 months?
As we have come to learn, pandemics progress in unpredictable ways, which means there is still a level of uncertainty hanging over the international travel sector. Many operators are in a precarious position, having run down their cash reserves with fewer credit options, while consumer confidence still looks shaky in the face of rising inflation and a cost-of-living crisis. The pressure firms are under is thrown into sharp relief by the results of our study. Almost a quarter (23%) of the ATOL protected agencies and operators we spoke to said they weren’t confident they could survive the next 12 months without the need for further lender, stakeholder or Government support. With close to 1,700 ATOL members currently in operation, that could translate to more than 380 company failures if these fears are realised.
New UK travel restrictions
42%
New overseas travel restrictions COVID-19 impact on staffing Cost of testing for travellers New COVID-19 variants
41%
While there appears to be significant pent-up demand for overseas travel, the potential for further travel restrictions stimulated by new outbreaks and variants still exists. Simon Stibbons Restructuring Advisory
40%
35%
34%
Inflation/cost of living No particular risk
33%
Is bigger better?
1%
Smaller firms appear more bullish about their prospects, with fewer than a sixth (15%) of firms with a turnover below £5 million forecasting they would need support, likely because they were able to minimise any ongoing costs during the crisis. Indeed, it is mid-sized travel firms that feel the most vulnerable, with a third (33%) saying they are concerned about future trading without a boost from backers, suggesting they have been unable to react to the crisis as quickly as smaller competitors while lacking the inherent resilience of their larger rivals. In response, firms have followed a range of measures to shore up their working capital during the pandemic. More than three quarters (78%) have moved to negotiate new payment terms with suppliers, while similar numbers (77%) have secured investment from stakeholders for ongoing trade. Many firms have also been forced into some difficult decisions, including cutting jobs or reducing hours (both 40%), not paying rent (38%), not paying pension contributions (34%) and deferring VAT or other tax obligations (33%). As a result, almost a quarter (24%) say they are not confident of securing their next ATOL licence at the end of March. Again, we can see these fears are felt more strongly in the mid-market (35%) than among smaller firms (12%).
*Results based on responses from 250 executives from ATOL protected businesses, who each selected up to three risks
The supply chain domino effect
The pandemic has impacted global supply chains for everything from steel to silicon chips. For ABTA members, their supply chain is made up primarily of hotels and other accommodation providers, as well as airlines and other transport companies, predominantly based overseas. These are businesses that have experienced the exact same pressures as travel operators in the UK, with plummeting demand and revenues forcing many to take some of the same measures to support their cashflow and avoid failure. That has an impact all along the supply chain, with more than two thirds (68%) of firms surveyed saying they had experienced losses from failures in their supply chain over the previous 12 months. Looking ahead, more than two thirds (68%) of the businesses we spoke to expect to come under pressure from creditors in the next year, including potential winding up petitions and County Court Judgements. For one in five firms (19%) that pressure is expected to be extreme.
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