Experts say tour firm failures are inevitable

A recent report has warned that insolvencies among tour operators are inevitable

Travel Insurance News - 26/10/2011

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The Red Flag Alert report comes via corporate administrator Begbies Traynor and says that recent figures are indicative that the current economy is sure to have continued adverse effects on tour operators and holidaymakers.

According to Begbies Traynor, the amount of travel industry companies dealing with ‘critical’ levels of distress has skyrocketed in recent months, jumping to 49 per cent. Likewise, those facing ‘significant distress’ is up 3 per cent from one year ago and had increased by 29 per cent over the past three months.

Begbies Traynor partner Julie Palmer called the trend a ‘warning signal’. She said this was particularly the case because the fourth quarter is usually the low point in terms of cash availability for travel industry and seeing companies in such distress during the third quarter was a clear alarm.

The report follows a recent announcement from high street tour firm Thomas Cook saying that it would be taking out a £100 million short-term loan to make up for a lack of cash leading up to the December and January travel season. The boost follows a series of profit warnings in the last year, which combined with the company’s top official stepping down has driven Thomas Cook shares down by some 80 points.

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