09 July 2009

More agency failures to come, warns PwC

PricewaterhouseCoopers is warning of more travel agent failures in September following the closure of Miles Travel this week.

As news of the failure of the Kent agency broke, PwC insolvency partner Ian Oakley-Smith issued a statement outlining what this means for the industry.

"It is very sad to lose an agency that has been serving the travel community for nearly 40 years, however it is an indication of torrid times ahead for the industry," he said.

"A hot summer will not dissipate the gathering storm clouds and we expect to see the next spate of agent insolvencies in September.

"Despite attractive discounts for long-haul destinations, the weak pound and prospect of a hot British summer, has meant those travel agents who can tap into the domestic market may fare better over the next few months than those purely reliant on long haul.

"The travel industry is almost unique as it holds consumer cash months before it delivers the product. It is therefore easy to mistakenly believe the business is cash rich. In reality, a lack of bookings can catch up with cash flows very quickly. Therefore, seemingly suddenly, performance can nose dive."

But Oakley-Smith said strong financial management can help agents avoid disaster.

"Regular analysis of good quality information is needed to plan for the inevitable reduction in bookings going into the summer, long-haul winter holidays and next year's ski trips."

According to PwC, the travel industry experienced a 145% increase in insolvencies from Spring 2008 to March 2009, and an 80% rise from quarter one to quarter four this year.

By Bev Fearis