The number of travel companies encountering “critical” financial problems is rising, as consumers tighten their grip on discretionary spending.
A study by insolvency services firm Bigbies Traynor showed that companies in the travel and tourism sector saw a 31% rise quarter on quarter in “critical” status.
The Q2 2011 Red Flag Alert Report doesn’t differentiate between leisure and business travel companies.
This is despite the long Easter break and extra bank holidays, which should have been beneficial to trading, said Ric Traynor, executive chairman of Begbies Traynor Group.
Hotels and accommodation providers in particular are seeing a worsening outlook, with a 47% hike in the second quarter of 2011 compared to the first in companies facing “critical distress”.
Traynor said the increased costs being placed upon consumers is having an impact.
Consumer spending is already depressed and the impact of significant utility bill rises, combined with the increasing cost of fuel, is likely to have “further serious consequences for any businesses dependent on discretionary spending”, the report stated
In the short-term, the future looks bleak, said Traynor: “We believe this distress is likely to continue ahead of the pre-Christmas shopping period, which traditionally starts in early October.”