Travel companies’ stay of execution to expire

A top travel accountant has warned that there will be more travel company failures in 2010 as investors’ patience runs out.

PricewaterhouseCoopers (PWC) director Ian Oakley-Smith said there had not been as many failures this year because of the “relative forbearance” on the part of the regulators, funders and investors.

He explained: “We saw a number of businesses close to failure but shareholders decided to put up with it rather than close the business down.”

A more flexible attitude from HM Revenue & Customs also ‘kept the wolf from the door” in a number of cases.

However, he did admit: “2010 will be another tough year, and this forbearance can’t continue for ever. There will be more failures.”

Another factor which helped struggling businesses survive was the fall-out from XL Leisure Group’s collapse last September.

“When this capacity was taken out of the market it gave a number of businesses a lifeline to see them through the fallow period from October to December. That won’t be there this time.”

Earlier this month, PwC predicted a “ticking time bomb” in the travel industry, suggesting that last month’s collapse of Ireland’s biggest tour operator, Budget Travel, was a sign of things to come.

Oakley-Smith was a panellist at Travolution’s Question Time event in London this week.

Fellow panellists included Ranjan Singh, co-founder of Isango, wh acknowledged his business went through “very tough times” during the end of 2008 and beginning of 2009, because “we sell experiences (which) are discretionary within the trip”.

However he is more optimistic for 2010 because of reduced capacity in his sector and a general uplift in consumer sentiment.

World Reviewer managing director James Dunford Wood argued that the first three months for 2010 would be critical.

“A lot of retailers could go out of business after Christmas and the impact on customer sentiment will hit travel companies,” he said.