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01
June 2009
Paul writes:
I have been enjoying a Caribbean break in
Antigua, and it never ceases to amaze me how
different the Americans' view of holidays is
to the British.
You would think the Caribbean to the
Americans would be very much like Europe to
the British. The British seem obsessed with
price-comparison websites, checking 12 to 20
different prices, getting the best deal,
moaning if something isn't right, and
generally looking at travel as if trying to
flee. The Americans view their holidays more
as short breaks, positive experiences in
themselves, a chance to meet new people,
taste new foods and see new cultures.
I get the sense that the British are
escaping from home, work, problems, negative
news, credit crunches, and such like!
It is hard to remain positive, particularly
in the current environment, when the
regulatory, banking, credit, margin and
competitiveness of our industry can so
easily bring you down (as it did for Freedom
Travel).
We are operating in difficult
times.
It is okay for the large companies, because
they have the balance sheets, influence,
aircraft and brand to flourish in a
recession.
The main trade bodies are predominantly
influenced by those same larger companies
that pay the most fees, and thus set the
regulatory framework (possibly in their
favour some might argue) in which we all
have to operate.
The industry has an ATOL system dependent
upon the 10 million ATOL protected customers
that the big two vertically integrated
customers bring, and therefore, by its very
nature, must be constructed with their views
as paramount.
So, the question is - how do smaller online,
asset light companies, taking substantial
risk with investments in new technologies
and distribution methods, thrive in a
regulatory and trading environment better
suited to the larger players? Not as
easily ...
Some thoughts, then, for our regulators:
1. Change the net free asset
calculation to encourage internet companies
to continue to invest in technology, and
specifically to use these same investments
on their balance sheets, and change the
whole rationale behind the current asset
ratio calculations.
2. Address the absurd dichotomy
whereby the industry is encouraged to sell
unbonded seats, ahead of bonded charter
seats (which for some ridiculous reason then
have to be rebonded( thus diminishing any
potential to top up an underfunded ATOL
scheme.
3. Consider whether the current ABTA
pipeline funding of £100,000 that the system
currently covers is sufficient to really
protect trading between ABTA companies
perhaps running into the millions?
Why is it that it is still so unclear by
whom, and to what extent consumers holidays
are actually protected? Is it ABTA, is it
the credit card, is it the ATOL, or is it
another insurance policy? If the industry
cannot understand it, then what hope has the
consumer?
I suspect that in two years time (remember
we have a general election next May) a new
minister of transport, or is it tourism,
will need a further 12 months to review and
consider our fractured lobbyists
submissions, in order to make any
quantitative changes.
In the mean time, it is the time to keep
overheads tight, risk proportionate, and if
you are cash rich, invest at lower
multiples.
This summer at least seems to be holding up,
with the big operators down on capacity,
flat on revenues, and profit forecasts in
line with City predictions. There still
seems to be aircraft capacity left, into the
sub three-hour destinations at least and
hotels are finally bringing their rates down
to reflect the realities of lower demand.
So, outside of the PR spin on Turkey and
Egypt, expect bumper late sales into
mainland Spain and the Balearics, where the
hotel might be a bit more expensive but the
flight should be cheaper, resulting in a
similarly priced holiday.
Happy hunting
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