Challenges Faced By UK Travel Companies

  • Mar 28, 2019 GMT
  • Team Kalkine
Challenges Faced By UK Travel Companies

It has been a challenging year for the UK travel industry. Due to Brexit effect, peak booking period for summer holidays in January was weaker than usual and consumers are holding off their travel plans. Last summer’s heatwave encouraged the majority of people to stay at home. Moreover, a weakening pound in the international market was the main factor that had hit profits.

As per the statistics provided by the Trade organisation ABTA, the average number of holidays taken per person in the UK had fallen from 3.8 in 2017 to 3.4. Older travel agencies with both physical and online presence had to adjust to changing consumer habits. 

For Thomas Cook, which started its business in the year 1841, 2018 was a difficult year. The company had issued two profit warnings and had reported a pre-tax loss of £163 million in its annual results as compared to a £9 million profit a year before. A long delay in bookings and the impact of foreign exchange movement lead to an increase in the net debt to £389 million, from £40million in 2017. The share price had also seen a significant decline by more than 75 per cent since last March. The company is planning to do the restructuring of its operations which would put more than 300 jobs at risk.

Thomas cook had a strong physical presence. Its business is not affected only due to consumer uncertainty but also due to a surge in the online holiday booking. As per the data given by the company, over 60 per cent of its bookings were made online via its website last year. Based on that the company decided to shut its multiple stores.

According to Peter Fankhauser, Thomas Cook’s chief executive: Customers not only want to book their holidays online, but they also want to pick the room in which they would be staying.

In the financial year 2019, the company would be focusing more on high quality, higher-margin hotels and destinations and will continuously work to reduce the costs.

On the Beach which was founded in 2004 went public in 2015. As per analysts the company’s proprietary tech is upsetting the traditional travel industry and is capturing more market share. The company reported revenue of £104.1 million in 2018 compared with £83.6 million in the year before and its profit before tax was £26.1 million, up by 24 per cent from £21.1million. Heavy spending on marketing had helped the company to gain market share. In 2018, the company had reported an advertising costs as a proportion of revenue were 37 per cent, although the company is trying hard to reduce this and to improve margins.

As per Simon Cooper, Chief executive, the company was affected by last year’s UK heatwave. But the company was fortunate enough as it didn’t have to decide the type of holidays it’s going to sell in advance. Traditional tour operators buy hotel rooms and book airlines seats in advance. The company’s policy is to book tickets where the customer wants to go.

 In August 2018, the company bought luxury travel operator Classic Collection Holidays for £20m in a bid to extend its market beyond package and beach holidays. The company is expected to launch a joint online portal by the end of March.

Hostelworld is catering the needs of a different kind of traveller, according to its Gary Morrison chief executive, who joined from Expedia in 2018.

The company is an online-only agency with a pure focus on hostels. The company has operations in more than 170 countries worldwide, and more than 36,000 properties had been signed up to its booking system. As per the company, most of its travellers do their bookings on mobile and mostly on the move. Most travellers like to travel solo and are aged under 30.

Due to geopolitical uncertainty, currency fluctuations and 2018’s heatwave there was a decline in the share price of all the major companies of the travel industry. Despite the excellent financial performance shown by the companies, their shares have been declining majorly because of the macroeconomic factors.

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