Budget operators ‘can’t afford to discount’
Tuesday, 19 Aug, 2010
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Accountancy firm PricewaterhouseCoopers says recession discounting is to blame for pushing low margin businesses like Kiss Flights ‘over the edge.’
Commenting on the collapse, PwC partner Ian Oakley-Smith said: "There are no phoenix from the flames stories this year for the travel industry.
“Unlike other hospitality and leisure sectors, such as pubs, those tour operators who are going out of business cannot be resurrected.
“Pubs enjoy assets, and therefore bank borrowing and a controlled restructuring, allowing them to emerge from an insolvency as a trading business.
“Travel firms do not have this luxury and therefore when they run out of money, there are no options left.
"However, no one expected to see this money running out during the height of the holiday season.
“In an attempt to preserve the summer holiday consumers have become very savvy at sniffing out value for money deals – one of the reasons why budget travel firms such as Goldtrail, Sun4U and Kiss Flights have failed.
"But the postcard picture is more complex. Yes, the industry is suffering from a lack of consumer finance as we reign in our credit card lifestyles but it is the budget end that is suffering.
“Budget businesses work off low margins and emergency reserves have been eroded during the downturn.
“This year’s shock events, such as the lingering ash cloud, have forced them to price low to win business.
"This discounting has been enough to push some over the edge."
by Debbie Ward
Bev
Editor in chief Bev Fearis has been a travel journalist for 25 years. She started her career at Travel Weekly, where she became deputy news editor, before joining Business Traveller as deputy editor and launching the magazine’s website. She has also written travel features, news and expert comment for the Guardian, Observer, Times, Telegraph, Boundless and other consumer titles and was named one of the top 50 UK travel journalists by the Press Gazette.
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