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Insolvency
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c
om
Travel firm failures: tip of the iceberg?
iStockphoto
rates ‘to hit
40
Travel and tourism insolvencies
Hotel insolvencies
35
new peaks’
30
25
PricewaterhouseCoopers’ latest
20
assessment of the travel sector
suggests more firms will collapse. 15
Lee Hayhurst reports
10
A STEEP increase in the number of travel firms
5
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08
failing in the final quarter of 2008 might be the
tip of the iceberg, according to leading London
PricewaterhouseCoopers’ latest quarterly insolvency report shows an acceleration of
accountancy firm PricewaterhouseCoopers. failures in both the travel and hotel sectors in the second half of 2008
Revealing its latest insolvency figures, PwC
said the “steady trickle” of failed companies
“started the climb towards new heights as the
threat of airline failure looms in 2009”. the next few months for 2009 summer holidays with weaker balance sheets may find it difficult
PwC director Ian Oakley-Smith said: “Discount- will determine the rate of failure for these to avoid failing or being taken over.”
ing the Travelscope and XL administrations, we businesses,” said Oakley-Smith. The hotel industry should not expect an
can see the level of failed travel companies “Travel agents and tour operators both upturn this spring, warned PwC.
increasing steadily over the last two years. This operate in a regulated environment, but will Hospitality and leisure director Stephen
may, however, be the tip of the iceberg. continue to feel the pressure during 2009. Those Broome said: “Experience from previous
“With around 30 airline failures forecast over economic downturns tells us the hotel industry is
the next year, those travel organisers operating Insolvency: hotels hit later in the cycle than other sectors. This is
under an Atol will be expected to find alternative partly due to extended lead-in times for hotel
■From autumn to winter in 2008, there was a
air travel for their customers.
100% increase in the number of hotel operators
bookings, which means the impact tends to fall
“This kind of unexpected financial outgoing going out of business six to 12 months after some sectors.
could finish off a number of smaller companies.”
■The fourth quarter of 2008 saw 36 hotel
“However, as was experienced in the
However, PwC said the failure of XL,
companies enter an insolvency process
last recession, the negative impact on hotel
■The number of hotel company insolvencies for
although catastrophic for some firms, actually
the whole of 2008 increased by 98% from 2007
performance is likely to accelerate sharply at the
helped to save others by taking capacity out of a start of the technical recession, suggesting these
saturated market. early casualties are just the beginning.”
Oakley-Smith said: “XL operated 3% of the Insolvency: Agents & operators On the positive side, Broome said the industry
market and its demise will have freed up share was better placed to weather the current
■In just less than the past two years, the number
for other travel companies. As more become
of tour operators or travel agents becoming
recession, and that many failures to date were
insolvent in 2009, this will benefit some of the insolvent increased by 50% down to already flawed business models.
larger players and the gulf between winners
■15 companies went bust in England and Wales in
PwC said the hotel firms that will benefit in the
and losers will widen.”
the final quarter of 2008. And there were a third
downturn are those that selectively invest while
more travel insolvencies last year than in 2007
Ominously, PwC warned that the recent upturn others cut back in areas such as advertising,
■The fourth quarter of 2007 and the third quarter
in failures might be a sign of things to come,
of 2008 both saw major failures – Travelscope
recruitment, and customer and staff incentives.
as holidays slip down the list of priorities for
and XL Leisure Group respectively
Broome added: “Hotel businesses that under-
customers feeling the pinch, and travel starts to
■The XL Leisure Group failure last September
stand the need to develop new strategies can
accounted for 11 out of 24 companies becoming
experience the impact of the recession.
insolvent in that quarter
navigate the downturn in a way that makes the
“Bookings – or rather the lack of them – over most of the opportunities arising.”
16 06.02.2009
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