Travel and tourism pulse report
Travel and tourism: time for take off
Focus on cashflow and risk management
Have you accessed support from the Coronavirus Business Interruption Loan Schemes?
From our experience of previous economic crises, more businesses fall into insolvency due to lack of cashflow to fund working capital during the recovery stage than in the depths of the downturn. The travel and tourism sector finds itself in a precarious position, with cash reserves depleted after having to refund travellers for cancelled holidays or issue credit notes. That threatens their future ability to trade, as their ongoing ATOL membership is incumbent on them hitting certain financial criteria that prove their robustness. On average, the firms we surveyed said 40 per cent of their revenues for 2022 would come from refund credit notes. And for almost a third (30%), refund credit notes would account for more than half of their 2022 revenues, which is likely to reduce the availability of working capital as firms play catch up on credit notes. It’s certainly telling that 100 per cent of the businesses we surveyed had taken steps to preserve cash in the past 12 months. That said, the funding environment does look positive.
Yes, from CBILS
Yes, from BBLS
The travel and tourism sector finds itself in a precarious position, with cash reserves depleted after having to refund travellers for cancelled holidays or issue credit notes. Simon Stibbons Restructuring Advisory
Yes from CLBILS
*Results based on responses from 250 executives from ATOL protected businesses, who each selected all schemes that applied to their business
What steps have you taken in the past 12 months to preserve cash, if any?
Almost three quarters (74%) of the firms we surveyed say they still have headroom on their existing lending facilities. Again, smaller firms appear to be in a better position, with 87 per cent saying they still have headroom, against just 65 per cent of mid- sized businesses. But, while smaller firms have the confidence of their lenders, they appear to have used up shareholders’ resources, likely because so many smaller businesses are owner operated and don’t have the deep pockets of larger organisations, many of which enjoy the backing of a private equity partner. So, while just over three quarters of the firms we spoke to (76%) had already received further funding from existing shareholders during the pandemic, that rose to 84 per cent of smaller firms, and fell to 67 per cent among mid-sized firms. When we asked if existing shareholders and/or lenders would be prepared to provide additional funding should they experience further disruption due to COVID-19, only three per cent said that door would be closed – a statistic that may well prove overly optimistic. Notably, just one per cent of smaller firms said shareholders and lenders would withdraw their support in the event of further pandemic disruption, compared to six per cent of medium sized businesses.
Extend terms with suppliers
Non-payment of pension Non-payment of rent
VAT and tax deferrals
*Results based on responses from 250 executives from ATOL protected businesses, who each selected all steps that applied to their business
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