19 December 2008
Some silver clouds on the horizon
Comment by Jeremy Skidmore (www.jeremyskidmore.com)
It’s that time of year when we all drink and eat ourselves stupid and start to make some predictions about next year.
Usually, it’s all a bit of fun and we concentrate on who are going to be the winners and don’t tend to think too much about the losers.
But this time, it’s all a bit different with storm clouds not just on the horizon, but actually already starting to soak us. Anyone who hasn’t been affected at all by the credit crunch is either extremely lucky or lying.
But it isn’t all doom and gloom - there is evidence to suggest that many companies will come out of this depression in good shape.
A poor November and December are not reasons to despair; bookings would be horrible at this time of year anyway.
Tour operators are fond of saying that holidays are a necessity, not a luxury. For those still employed - and that is the vast majority of people - that is probably true. They’ve got several weeks off a year and can only spend so much time knocking around the house.
They may trade down or look elsewhere, but they will want to go away and its companies that are offering good value which can ride out the storm - whether they are travel agents, operators, online players or all three.
Everyone wants a deal and it’s no surprise that bookings for all-inclusive holidays and non-Euro destinations such as Turkey and Egypt are holding up. The UK could do well this year, although a lot depends on the weather.
The big companies, TUI and Thomas Cook, have recorded spectacular increases in profits this year on the back of consolidation. It’s unrealistic to think they can repeat those successes next year, but with the capacity cuts and the collapse of xl.com, they are better placed than they’ve ever been.
It’s worth remembering that in the last recession, in 1991, we had a Gulf War and ILG collapsed, but the other major operators did very well, thank you.
However, their brochure prices are up 5-6 per cent on last year and I have my doubts about whether they can maintain that in a tough market.
But I don’t think you need to be massive to survive; people will shop around like there’s no tomorrow and anyone with an attractive (ie good value) offer is in the game.
Companies with good PR machines can get some important messages out. I’m not talking about those tired claims to be "bucking the trend", but useful information for the public about how they can get a good deal, make sure their holiday is protected, etc.
Of course, there is going to be a lot of bad news. It doesn’t take a genius to predict that several companies won’t survive in 2009.
At a press briefing this week, Thomas Cook chief executive Manny Fontenla-Novoa estimated 10-15 companies could go over the next few months because they won’t be able to get banking facilities in place.
Meanwhile, Spain and Greece are well down because of the fall of sterling against the euro and the ski market has struggled, although it is a small part of the market for the bigger operators.
Luxury operators are seeing bookings fall because people can’t justify the expense.
Cruising, the star performer in recent years, is having a tough time.
Cruising is actually very good value for money when you work out exactly what you get, but it’s still a difficult sell to hard-up customers because the initial outlay looks large. It might seem logical that cruises would sell well (like all-inclusives) because people can budget their money more easily, but people don’t have such a good understanding of cruising.
There are still some myths to be quashed. Those cruise companies that can get the right message out will be the ones that prosper.
Have a great Christmas and a prosperous New Year. It’s going to be tough, but that doesn’t necessarily mean it will be a disaster.
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Your Comments (1)
The way to survive is to re-negotiate with all your suppliers as much as possible to get the prices down and the places filled. Ryanair are a prime example, with the oil price plummeting, this credit crunch is simply re-inforcing their dominant position - they are really turning the screw with 2p fares.
By Gary Phillips, Friday, December 19, 2008