Tough times: the top five challenges facing UK travel

If you can survive the lean times you will flourish in boom times. This is a sentiment that many UK travel firms will be hanging onto this year as the market becomes increasingly mature, the recession deepens, the Olympics keeps people closer to home and consumers – with less to spend - become more demanding.

While holidays remain a high priority on people’s spending list, the pressure is on travel organisers to deliver better deals while at the same time offering greater consumer protection. In these trying times what should firms be thinking about? While they should certainly be looking for opportunities elsewhere, first they need to understand the challenges facing them for the foreseeable future.

EyeforTravel’s Pamela Whitby spoke to Mark Tanzer, chief executive of ABTA, the travel association, who identified five big issues facing the UK travel industry in the coming year. These are:  

1.    The recession: This is undoubtedly squeezing consumer spending and while things have been tough for some time, this year it has really hit home. In this market, travel operators are having to reduce capacity in order to fill their holiday programmes. One solution is for operators to ‘de-risk’ their business model by, for example, cutting back on hotel commitments. But of course there are risks to this as well – such as disappointing customers for not having the right hotel in the right place at the time they wish to travel.

2.    Access to, and the cost of, finance – another headache: Because of the seasonal nature of travel, firms need effective financial markets to access capital at reasonable rates when they need it. They also need to have ways of protecting consumer money and in times of shrinking confidence in the banking sector and lack of finance availability the pressure on travel firms is mounting. “It’s imperative that travel companies keep a continuous dialogue with their financial providers, and the regulatory bodies, and really treat them as business partners,” says Tanzer.

3.    Politically or economically risky destinations:  Greece and Egypt where many tour operators have interests immediately spring to mind. Here bodies like ABTA are working hard to ensure that there is good intelligence on the ground to ensure that consumers and the industry have an accurate view of the real situation, and act accordingly.

4.    New regulations: In the UK complying with new government-led consumer protection regulations such as Flight-Plus Atol is also now very much a reality. As Tanzer points out, many firms are still coming to terms with the reforms and applying for licences.. On the European scene the whole picture of consumer protection is under review, and that will have a profound impact on the way in which travel is sold across Europe.

5.    Taxes and capacity: Finally, in difficult trading times UK operators must dedicate more time to campaigning for the removal of what Tanzer describes as “value destroying taxes”.  He is referring to, for example, the Air Passenger Duty (APD) which MPs argue is helping to reduce the country’s deficit. ABTA disagrees arguing that this tax costs the country more than it makes and is calling for lobbying through groups like the Fair Tax on Flying. Of course the other issue is the lack of airport capacity in the south-east which leaves very little margin for error. Tanzer calls for the industry to “keep up the pressure” to get a cross-party view on the issue of a new runway for the south-east because the UK is “in danger of losing the opportunity to establish itself firmly as an international travel hub”.  With reluctance from government and other anti-expansion pressure groups to rush for a third runway, the industry has its lobbying work cut out.

Looking for opportunities

While the challenges are undoubtedly many and there are no simple answers it is not all doom and gloom for the UK industry. The market may be mature but as a world leader in organised travel firms have many traditional – and exportable – skills, Tanzer argues.  And because of the nature of the business, they need to become adept at working with partners from across the world.

Across the world tourist numbers are growing. The UN’s World Tourism Agency forecasts growth in international tourist arrivals of between 3 and 4% this year.

So Tanzer recommends that firms look to other markets which are increasingly developing the sort of holiday product that the UK has experience of putting together. He cites Russia (watch out for an upcoming feature on EyeforTravel) and India as examples. “We need to think creatively, using our underlying skills that we have gained through leading the development of large scale tourism,” he says.

For international expansion to work, operators will need to identify strong partners and work closely with them. This is another advantage as the UK is, Tanzer says, “quite used to building relationships with outside partners”.



Related Reads

comments powered by Disqus