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, or 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.
Paul Evans is chief executive of Lowcost Travel Group