Are the TOs going to fold in droves?

A snowHead

The exchange rate has gone so very bad that I wonder if the TOs have been able to hedge their funds sufficiently. My guess is that the TOs, even the big ones, could fold.

Any sH in the trade have thoughts?

A snowHead

Ask boarder1.

Well, the person's real but it's just a made up name, see?

Won't they just whack on supplements? Don't they have a clause in their T&Cs that says if the FX rate gets bad they reserve the right to charge extra?

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rob@rar,

I think they do and Im dreading that email !!

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Be good for those of us who travel independently though. Nice uncrowded slopes, even at half term.

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achilles, For the most part rob@rar, is right they can ask for supplements .. however the much bigger issue will be how exposed they are to unfilled beds/flight commitments ( and fuel is working in their favour) .... a couple I know have been very sharp and conservative in preparing for both this winter and next summer. That obviously doesnt apply to all. As punters we can expect some great 'Firesale'/'Last Minute/ deals though ... despite the ERs. I havent looked but I bet even Xmas/New Year are being heavily discounted by some.

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achilles, Speedferries have gone and I see no reason why low margin TO's will not be vulnerable. We have been in recession in our trade for a year or so, but now the whole economy is being battered. I am now hearing rumours about some of the well known names in our trade. If it is one season then 1 or 2 may drop, but if it runs into 09-10 then I suspect many will fail.

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Frosty the Snowman, There are a number who would privately admit that by the end of the first week of January theyll be able to say whether they can make it that far ! I dont know the ski industry specialist TOs btw ..

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I have one particular prediction to make, but I am not about to post it in public. Laughing

In general I would say:

* Top end operators won't fare too badly. The stupidly rich, like the poor, are always with us. Though having said that, I know that one very high-end TO is prepared to drop chalets which don't sell and consolidate bookings elsewhere. Their staff overhead is much more significant than that of other operators.

* Cheap 'n' cheerful will be OK as people drop down the price scale. Spies tell me that one of the bigger of the cheapish TOs is 10% up on last season at the moment.

* Schools ops are reasonably secure for this season - their clients book early, and parents will lose a lot if they pull out now (not to mention not wanting to disappoint children). But next season could bomb if things don't improve over the summer.

* The huge players will still be there at the end of the season because they benefit from economies of scale, the muscle needed to beat suppliers into selling at tiny margins, and a diversified portfolio of businesses. Don't expect to see TUI sink any time soon.

* Small mid-range operators must be cacking themselves right now. Small margins, minimal economies of scale, paying supermarket prices for supplies. Lots of them offering what you might call 'aspirational' holidays to people who'd like to book Scott Dunn but can't actually afford it - those people are going to bite the bullet and sack off their aperitifs and canapes and cooked breakfast in bed. My prediction would be that the ones which hang on will be the specialists - child/family ops for example. I won't be surprised if we finish the season with significantly fewer beds than we started with.

In resort I would expect bars and restaurants to suffer but supermarkets to gain as people self cater/buy booze to drink in their chalets of an evening. Local hoteliers could lose out as the big TOs push their guaranteed accommodation and drop beds on option elsewhere.

All 'if current trends continue' of course, which is often a dangerous assumption. Let's face it, we could all be run over by a bus tomorrow.

On the positive side, I think we can squeak through to the end of the month without raiding the savings account, which means I have paid taxe fonciere out of current funds! 300 spare euros, bargain. What fabulous household budgeting skills I do have.

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PS. Further prediction - big rise in whining complaints as people fail to adjust their expectations to match the price they've paid. Laughing

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Lizzard, yup. The Rynair syndrome. Interesting summary in your previous post. Not certain about the likes of TUI weathering the storm this season. I'm inclined to think they will, and I accept that you are far more directly in touch than most of us punters. But I understood that in the past TO profits were only a few £££ per holiday. If so then the effects of fire sales could be pretty debilitating, but maybe they may have sufficient reserves to take the hit for a while.

bunch of doom mongers the lot of you rolling eyes

You know it makes sense.

achilles, TUI are German so not only bigger but better placed than most at worst they may cut back on some UK operations.

Otherwise you'll just go on seeing the one name:

As a non-travel industry person, but one with an obvious interest in how much people are willing to holiday, I would agree that rather than currency woes (which they would have predicted given all the noise about them earlier in the year and the well-documented impending financial doom), it is more likely to be empty beds that cause the problems.

[conjecture] I would imagine that, despite the economic problems being global, the big TOs with an international market (TUI for instance) might fair better, on the basis that from a cultural point of view, for a lot of German and Dutch families for example, the annual ski holiday is just as much as a staple as the holiday in the sun, whereas I would imagine that there will be a lot of UK families who might be thinking about dropping skiing (the 'expensive'/extravagant holiday with all its 'hidden extras') so they can be sure they get their summer holiday. Obviously this doesn't include most snowHead

who are obsessed enough to make snow a priority, but are also probably less likely to book TO hols (I think, from what I've seen). All IMVHO of course!

Agree that bars and restaurants may suffer, people will be looking to spend fewer pennies in resort. I also reckon that where TOs might gain is that people will be trying to figure out the trade off between potentially cheaper s/c cook in type hols, versus hotel HB arrangements, where you know you only have to pay for drinks and lunch - maybe predictable is good in this kind of scenario?

I'm nevertheless envisaging at least a couple of 'british tourists stranded abroad after TO/airline failure' headlines in the next 6 months.

I also to some extent expect that for the 'early-bird' type bookers, this year might be something of a last hurrah, and having booked and paid eons ago, they may as well enjoy it.... Pure conjecture of course, but using myself as an example, we're off on a long-haul hol to the sun next week, it's expensive, we paid for it ages ago, would we book it today? No, but we may as well go now and have a ball, nothing to be gained by cancelling now.

All pure conjecture based on nothing at all BTW!

D

A snowHead

Is it such a bad thing if they do? Ok so not great if clients are out on holiday and abta etc need to get involved, and yes also not great for those working for the various to's and yes I hope the small guys make it through ok - you know the like of parlor et al that are 'living the dream' and undoubtedly providing a great service in their chalets/appartments or similar.

But I struggle to loose sleep over the idea of some bigger TO's going bust / losing money, would it be such a bad thing if some of the more 'cowboy' operators ended up going to the wall

A snowHead

bertie bassett,
If there are cowboys out there I don't think anyone would complain. But a lot of the mass market tour operators are very important intermediaries for small businesses ,ski schools hoteliers etc. in the alps. I would not wish ill on any of them and hope they pull through.

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bertie bassett, well no from the POV of I would only like nice people/companies to make money and be successful, but in terms of customer choice, it would have ramifications for the following seasons. Love em or hate em, the 'sell it cheap pile em high' TOs are used by a lot of people.

I don't think that nice friendly and ethical copmanies are immune from the risks either... In fact I suspect the cowboys might be more likely to ride the wave through cowboy tactics than some of the smaller more ethical ones.

D

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People will not have funds for many things.

Those that have discretionary funds may be loathe to spend them for fear of what the future holds.

Winter holidays and multiple holidays are a relatively new phenomenon.

Even the pubs are suffering. People cannot/will not pay pub prices. ASDA is the new pub for many who drink cheap alcohol at home.

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Although I thought it would be a quieter time of year to renew two of my families passports, I was surprised by how quickly they were returned.
Posted this Monday received back on Thursday.

After all it is free

bertie bassett, That'll be 'cause it's high season in Dubai - try again in the summer

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Hmm reading all this has me thinking I may be able to sneak a 2nd week somewhere for not too much dosh

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TUI are also German so have practically no exchange rate risk

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eng_ch, they have when they are pricing their holidays in £ for British punters.

eng_ch, it's the exchange rate rather than anything else which will be the killer for UK TOs - income in Sterling, expenditure in Euros, suddenly everything except staff wages comes in at a third more than you budgeted for. And falling bookings because the punter is in exactly the same position. There's only so much hedging you can do, especially given the inevitable fluctuations in cash flow for a seasonal business.

You know it makes sense.

achilles, depending when monies are paid of course .... TUI are a different class with much broader interests than your 'normal' UK TO

Otherwise you'll just go on seeing the one name:

Agenterre, sure, I accept that. Even so, even for them if the British part of the operation runs at a loss, that would look pretty exciting in their accounts, I think.

A snowHead

achilles, Lizzard, I would have thought TUI are far less dependent on their UK customers. Their German customers for summer holidays and winter sun probably allow them quite a lot of margin on their UK customers for winter hols. I stand prepared to be corrected of course, but EUR is their base operating currency unlike many UK TOs

A snowHead

Lizzard, they also exchange monies at time of receipt and hold as such. Standard practice . The ER should not be an issue for ski TOs by now .. if it is, they've screwed up.

Well, the person's real but it's just a made up name, see?

Agenterre, yup. That secures holidays already booked. The problem is those holidays that have not been booked. There is also the small matter of punters who have paid their deposits, but not yet the balance - and for that matter may not be able to pay it.

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achilles, I agree totally about volumes, that depends upon the great UK skiing public... and why the main problem by now ought to only be o/s receipts for half-term ... and Ive no idea about cash-flow for ski TOs specifically .. but Im sure one of them here will comment on their specific ER exposures.

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Agenterre, look at availability - most ops have only sold about half of their total so far (and will only have deposits for lots of it as well), with the bulk of the overseas bills still to pay (food, utilities, outstanding chalet rental, transfer coaches etc etc).

eng_ch, I'd agree re TUI - probably better placed than the rest to take a dive in the UK market. I hear a rumour that they're planning to ditch their clubhotel programme, but that predates all this plummeting pound business.

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Q3 results for TUI released today .. yes 3 months .. small arent they ! wink

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No sign of the evil empire disintegrating just yet then. Pity, since the way things are going your holiday choice shortly could be TUI, TUI or a tent. Although come to think of it they do camping as well, so not even that. Sad

After all it is free

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Are the TOs going to fold in droves?

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