Unanswered questions from the Global Travel Taskforce report

On 9 April, the Global Travel Taskforce released its report setting out plans to get international travel started again safely. Here’s our take on the report and the questions we hope will be answered in the coming weeks.

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The COVID-19 crisis is rapidly evolving and the Government's response and the details of support on offer are continuously changing. We'll be updating our posts regularly to ensure our analysis and advice remains as accurate and useful as possible. To receive the very latest information as we release it follow us on LinkedIn. If you have any questions in the meantime, please get in touch. 

Road to recovery – key milestones on the journey back to travelling

Throughout the pandemic, there have been endless amendments, extensions and general tinkering to support schemes, regulatory rules and compliance obligations. To help keep track of these changes, we’ve updated our previous infographic of the critical dates that travel businesses need to be aware of over the coming months.

Map of travel dates

*Discount scheme:
• 100% off your business rates bills for the first 3 months of the 2021 to 2022 tax year (1 April 2021 to 30 June 2021)
• 66% off your business rates bills for the rest of the 2021 to 2022 tax year – up to a total value of £2 million
Find out if you’re eligible here.

If you would like a copy of the roadmap or need help determining what any of the dates mean for your business, please get in touch.

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The COVID-19 crisis is rapidly evolving and the Government's response and the details of support on offer are continuously changing. We'll be updating our posts regularly to ensure our analysis and advice remains as accurate and useful as possible. To receive the very latest information as we release it follow us on LinkedIn. If you have any questions in the meantime, please get in touch. 

TTC join finance panel at Future of Travel event

We were delighted to be part of Travel Weekly’s Future of Travel Spring Forum this week. TTC Director Adam Pennyfather spoke on a panel alongside WHA and Travlaw. The session covered several timely subjects, including:

• A look back over the past 12 months and the challenges to restarting
• The financial pressures facing businesses
• How stakeholders, including merchant acquirers, have reacted during the pandemic
• The importance of a good summer season for the industry

Below is a recording of all the day’s sessions; you can watch the panel 35 minutes into the video. We hope you enjoy it!

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The COVID-19 crisis is rapidly evolving and the Government's response and the details of support on offer are continuously changing. We'll be updating our posts regularly to ensure our analysis and advice remains as accurate and useful as possible. To receive the very latest information as we release it follow us on LinkedIn. If you have any questions in the meantime, please get in touch. 

Travel insights from ABTA’s finance conference

We were delighted to speak at ABTA’s Travel Finance Conference earlier this week. TTC Director Martin took to the virtual stage, to set the scene for the day and explore the key indicators for businesses as travel begins to recover. He discussed the recent government road map announcement and highlighted that although there may be some hurdles, it’s a positive step in the right direction.

He also talked about the impact of the vaccine rollout on the recovery of destinations and shared data on the January trading period.

Below is Martin’s presentation from the conference. If you would like to watch the full event, it will be available on ABTA’s website soon.

If you would like a copy of the slides, please get in touch.

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The COVID-19 crisis is rapidly evolving and the Government's response and the details of support on offer are continuously changing. We'll be updating our posts regularly to ensure our analysis and advice remains as accurate and useful as possible. To receive the very latest information as we release it follow us on LinkedIn.  If you have any questions in the meantime, please get in touch. 

TUI’s Q1 financial results: TTC’s Martin speaks to BBC News

“Covid has been like a wrecking ball to the travel industry.” TTC’s Martin Alcock joined BBC News this morning to discuss TUI’s Q1 financial results and to highlight the plight of the UK travel sector.

In the year since January 2020, TUI has gone from the most successful trading month in its history to needing more than €4bn of German government and shareholder bailouts to survive. 

TUIs actual Q1 trading results released a few hours after this interview, showed Winter bookings almost 90% down on last year, in line with what we’re seeing across the market.

A large group like TUI has access to multiple capital and funding options to help them get through these tough times. Many smaller travel businesses don’t have that luxury.

TUI are still hopeful of delivering 80% of their normal Summer ’21 programme. Even if that still feels over-optimistic at this point, the good news is just around the corner. Until then we need a tailored package of UK government support and a clear roadmap to get us travelling again.

Following this interview, TUI announced a €699m loss in Q1 as lockdowns and travel restrictions severely limited demand for fights in the last three months of 2020. You can view the results here. 

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The COVID-19 crisis is rapidly evolving and the Government's response and the details of support on offer are continuously changing. We'll be updating our posts regularly to ensure our analysis and advice remains as accurate and useful as possible. To receive the very latest information as we release it follow us on LinkedIn.  If you have any questions in the meantime, please get in touch. 

IATA has made some changes

In all the mayhem of the past few months, it may have escaped your notice that IATA has introduced a number of changes to its approach for assessing UK ticketing agents.

These changes could have material and wide-reaching consequences for your business, and you should review their impact carefully.

Here we have summarised our view of the most significant changes and identified some areas for you to consider. We hope you find it useful, but please remember, this is not meant to be an exhaustive list of all impacts. As always, there is no substitute for advice which is specifically tailored to your business!

We’ve covered:

-Changes to Local Financial Criteria
-New method of calculating Risk Holding Capacity
-New rules on the horizon for large agents

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If you have any questions, please get in touch.

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Preparing for March ATOL renewals

If you are due to renew your ATOL licence this March, there are a few areas that we wanted to make you aware of as you prepare to go through the process. TTC Director, Simon looks at changes to the financial criteria, additional information you may need to provide, Refund Credit Notes,  the impact of Brexit on EU sales, and security.

If you need any help processing your renewal, please get in touch. 

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The COVID-19 crisis is rapidly evolving and the Government's response and the details of support on offer are continuously changing. We'll be updating our posts regularly to ensure our analysis and advice remains as accurate and useful as possible. To receive the very latest information as we release it follow us on LinkedIn.  If you have any questions in the meantime, please get in touch. 

Travel in 2021: TTC Director Martin featured in TTG

Our director, Martin Alcock recently wrote an article for TTG Media reflecting on what’s been a very challenging year for the travel industry. He also shared some thoughts on how the Covid-19 vaccine may impact travel in 2021.

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You can view the article in the January 2021 edition of TTG here.

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How does the travel industry move forward?

The travel industry is currently facing two existential challenges – Covid-19 and Brexit. It’s hard to imagine how these events are going to pan out next year and how the travel industry’s recovery from the pandemic will look. This is something that our director, Martin Alcock, explored when he spoke to members of the Association of Independent Tour Operators earlier today.

Martin looked at the impact of the vaccine and highlighted that although it is very important, it doesn’t do that much for the practicalities of travelling in the short-term. He also discussed why we believe it’s vital that the industry continues to push for a coordinated testing approach. Martin also discussed some of the major questions facing travel companies going into 2021, including:

– How is the uncertainty going to affect the January peaks?

– What impact will fewer business travellers have on the unit economics of airfares, and therefore the price of leisure tickets?

– Although Covid has accelerated the rate of channel shift from offline to online across retail spending, will travel buck the trend?

Here’s the full presentation:

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The COVID-19 crisis is rapidly evolving and the Government's response and the details of support on offer are continuously changing. We'll be updating our posts regularly to ensure our analysis and advice remains as accurate and useful as possible. To receive the very latest information as we release it follow us on LinkedIn.  If you have any questions in the meantime, please get in touch. 

The growth of integrated travel companies

The challenges faced by airlines and tour operators during this pandemic are well publicised. 

Business activity has fallen off a cliff, and cash has flown out of the door as new bookings have dried up and old bookings have been refunded. 

But spare a thought for those that are both an airline and a tour operator. 

Whether you think of them as tour operators with their own airline (TUI, Jet2) or airlines dabbling in tour operating on the side (easyJet, BA, Virgin), integrated groups now represent five of the top 20 ATOL holders in the UK. You can see how the size of their ATOLs, which cover their flight inclusive package holidays has grown over the last eight years in our interactive chart here

When times are good, there are plenty of solid reasons why a vertically integrated, asset-heavy model is a no-brainer for a travel company. The ability to control the delivery of your product, manage your supply chain, and guarantee access to flying capacity are all invaluable when you’re selling holidays at scale.  

Of course, the trade-off is a massive reduction in flexibility. Operating an airline is incredibly capital intensive, especially when most of the aircraft are stuck on the ground. Easyjet and BA are still burning through £8million (easyJet) and £20million (BA) a day, despite flying less than 30% of their capacity and carrying out major cost-reduction programmes. 

On the face of it, asset-light companies should be able to weather the current storm better than the integrated groups. Take the third-largest ATOL holder, On the Beach, for example. Despite the pandemic, they are still trading at break-even thanks to their more variable cost base

On the other side of this crisis, though, integrated groups have a unique opportunity to reassert themselves. 

Right now, customers simply aren’t booking holidays. Interestingly, anecdotal evidence suggests that they fear the prospect of further quarantine more than catching COVID.

Travel corridors change weekly and destination access can be restricted within hours of a government announcement. Nervous customers are either avoiding commitment or deferring decisions until the last possible minute and booking much closer to departure. 

In order to stimulate demand in that kind of environment, tour operators and integrated groups have two moves: drop their price, or offer as much flexibility as possible, with options to change or cancel trips at minimal cost. 

Whilst larger tour operators are generally able to negotiate favourable terms with most of their suppliers to enable them to offer such flexibility, their airline suppliers have so far been unwilling to play ball.  

Integrated groups, on the other hand, have a unique advantage, and are offering innovative terms to their holiday customers that aren’t available to other tour operators. In recent weeks we’ve seen a few examples emerge: 

– TUI is offering customers the flexibility to change their holiday with no fee, up to 21 days before departure.  

– Easyjet Holidays launched a ‘Protection Promise’ offering fee-free changes or cancellations to holidays up to 28 days before departure.

– Virgin Atlantic Holidays announced a new ‘Escape Pass’. Customers choose their dates and hotel rating and will be guaranteed a holiday in the Caribbean where they won’t be subject to quarantine rules and restrictions. The customer will only find out two weeks before departure which destination they’re going to.

– BA Holidays are offering customers the ability to change destinations, dates or cancel altogether with three weeks notice. 

Owning their own airlines has given these integrated groups the ability to create flexible, unique, and highly defensible product offerings. 

All they need now is the recovery to take off. 

 

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The rapid rise of online travel agents

Yesterday, we shared an interactive graph showing the movement of the top 20 ATOL holders from 2013-2020. We also gave some initial insights extracted from our deep dive into the data. 

Over the next couple of weeks, we will be drilling down into these insights. 

Firstly, we’re exploring the rise of online travel agents.

Over the past eight years, we have seen the rapid rise of online travel agents (OTAs). 

They are built on slick, scaleable technology, selling primarily ‘fly and flop’ holidays and allowing customers to dynamically package a wide range of low-cost carrier flights and accommodation offers. 

By October 2020, six of the top 20 ATOL holders could be classed as OTAs, where online distribution is their dominant channel as well as their key characteristic. Given the business model barely existed a decade ago, their growth rate has been phenomenal. For example, the largest UK OTA, On the Beach increased its ATOL from 639,000 passengers in 2013 to 1.65 million by 2019, a compound annual growth rate (“CAGR”) of 17%. 

Loveholidays, a prominent PE-backed OTA grew from just 167,000 pax in 2015 to 1.37 million in 2019, a staggering CAGR of 69%! 

Faced with the onset of the pandemic, both businesses reduced their licence projections by around a fifth as the UK went into the first lockdown in March 2020. However, this was far less than the market as a whole which is down 33%

Will online travel agents continue to grow? To answer this question, we have to look at how consumer spending habits have changed as a result of the pandemic. 

How has COVID-19 changed consumer spending? 

UK consumers continued to spend money in spite of the pandemic. However, the closure of shops and restrictions on mobility drove an unprecedented shift to online channels over the past eight months. 

Data from the Office of National Statistics (ONS)* shows that over the past decade, consumers have been shifting online at a rate of around 1% per year. This leapt 9% in the 12 months to September 2020.  

Sadly, travel spending was a negligible proportion in the last eight months, but it is clear that consumers are far more comfortable transacting online than they were pre-pandemic.

In addition, a recent study from McKinsey indicated that the shift online transcends demographics, with older and historically more-technophobic generations turning to online purchases to ease the boredom of lockdown.  

So the prospects look great for OTAs post-pandemic? 

Not so fast! COVID-19 has been indiscriminate in its devastation of the outbound travel sector and OTAs have had as tough a time as any. Their technology has been unable to cope with huge numbers of cancellations, forcing them into laborious manual refunding processes. On top of this, the OTAs have been disproportionately affected by the delayed refunds from the low-cost airlines, resulting in customers receiving only part of their money back. 

Without a strong human relationship to fall back on, they have been roundly condemned in the consumer media. For example, On the Beach, loveholidays, lastminute.com and Travel Republic, all score poorly in this Money Saving Expert ‘70 best and worst firms for travel refunds‘ list.

Incidentally, the report named Trailfinders and Travel Counsellors as the top two. Both are businesses where human interaction powers the vast majority of distribution. 

It’s all to play for.

Going forward, we think travel will remain complicated for the foreseeable future. We expect travel restrictions to remain inconsistent, corridors to remain dynamic and testing and quarantine requirements to differ country by country. 

In this environment, it’s easy to imagine customers returning to service-led, knowledgeable, human travel professionals. This Advantage Travel Partnership study in October 2020 appeared to support this theory. 44% of 25-34-year-old respondents said they are likely to consider using a travel agent in future. 

At the same time, we know consumers have notoriously short memories. Customers at the value end of the market can always be enticed by bargain prices, leaving plenty of room for OTAs to recover when the great refund crisis fades from memory. 

However, we think the biggest opportunity is change itself. That same Mckinsey study reported unprecedented levels of customer habit changes over the past eight months, with over 63% of UK respondents reporting switching to a new brand, new service or new retail outlet for the first time. 

In that kind of environment, it’s all to play for.

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*ONS data, the proportion of total non-food sales online increased 9ppts from 14.7% in September 2019 to 23.7% in September 2020. The change from September 2018 to September 2019 was 0.3ppts. The average annual increase over the last five years to September 2019 was 1.1ppts per year. 

Deep dive into ATOL renewal data: 2013-2020

TUI and Jet2holidays are currently the top two ATOL holders, but how does this compare to the last eight years? What was the impact of the collapse of Thomas Cook, Monarch and others on the top 20?

We’ve spent some time digging into the ATOL renewal data between 2013 and 2020 and have pulled out some interesting trends. We have also charted the movement in the top 20 on the graph below. 

You can use the cursor to pause the graph or move to a specific year.

Here are a few trends we uncovered:

Consolidation in the market – the top three ATOL holders now hold the licenses for almost half (48%) of licensed passengers. The top 10 now hold the licences for more than two-thirds (68%). Will customers be increasingly drawn to the mega brands, especially if we start to see further smaller operators failing, or will they look to more niche operators?

–  Shift to online sales with the rise of On the Beach, loveholidays, and others, online travel agents have become a more popular way for customers to book holidays. Will this shift online continue to increase or will the complexities surrounding travel such as testing, quarantines and restrictions in destinations mean that customers will seek reassurance from speaking to an agent? We explore this question here. 

Increase in airline holiday companies the rapid rise of Jet2holidays, the steady growth of BA Holidays and the relaunch of easyJet Holidays means that three of the top six ATOL holders are now airline holiday companies. Will we see Wizz Air and Ryanair follow suit? Take a look at our further analysis of this trend here. 

The number of small ATOL holders has remained flat although not shown on the graph above, it was encouraging to see that there hasn’t been a decline in the number of Small Business ATOL holders (500 licensed passengers) between 2019 and 2020 and that there were also around 90 ‘new’ ATOL holders in the 2020 renewals. Will we see any innovative new package travel companies emerging from the crisis?

Over the next few weeks, we’ll be delving deeper into these trends and sharing plenty more insights. Keep an eye out here or follow us on LinkedIn.

If you would like more information on how we’ve analysed the data, please get in touch.

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Source data is from the ATOL website downloaded at various intervals over the eight years. The data for each year is based on the company's forecasts submitted in that year's March or September renewal.

Furlough scheme extended

UPDATE: The government has now announced a further change to the furlough scheme deadline. It has been extended until the end of April 2021 with the government continuing to contribute 80% towards wages.

The government has announced the Coronavirus Job Retention Scheme – also known as the furlough scheme – will be extended until March 2021. Due to the extension, the previously announced Job Retention Bonus will no longer be paid in February 2021.

Here are the key points from the announcement. There will be additional guidance published in the coming weeks so please keep an eye on our news & insights page for updates.

Infographic showing updates to the furlough scheme

Key dates

30 November 2020 – final date to submit for any claims before 31 October 2021
1 December 2020 – change in the approach for redundancy (more details will be available in late November)
January 2021 – review of the scheme
31 March 2021 – end of the furlough scheme

Note – employers should remember to change the terms of employment contracts by agreement before furlough starts as this will be needed for new furlough arrangements. Due to the rush to have everything in place for CJRS V3 in early November, it was possible to use retrospective agreements. However, please note that only those put in place up to and including 13 November 2020 can be relied on for the purposes of a CJRS V3 claim.

Additional grants

The government also announced additional support for businesses that are required to close due to Covid-19 restrictions. They will be eligible for the following:

– properties with a rateable value of £15k or under – grants to be £1,334 per month or £667 per two weeks;
– properties with a rateable value of between £15k-£51k – grants to be £2,000 per month or £1,000 per two weeks;
– properties with a rateable value of £51k or over – grants to be £3,000 per month or £1,500 per two weeks.

If you need any help understanding what these changes could mean for your business, please get in touch.

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The COVID-19 crisis is rapidly evolving and the Government's response and the details of support on offer are continuously changing. We'll be updating our posts regularly to ensure our analysis and advice remains as accurate and useful as possible. To receive the very latest information as we release it follow us on LinkedIn.  If you have any questions in the meantime, please get in touch. 

Update to the Government’s Job Support Scheme

UPDATE: The government has now extended the furlough scheme until the end of April 2021 meaning that the Job Support Scheme (JSS) outlined below has been postponed. We understand this will launch when the furlough scheme comes to an end next year.

The Chancellor Rishi Sunak yesterday announced some changes to the Job Support Scheme (JSS) for businesses that have been negatively impacted by Coronavirus. This is due to replace the current furlough scheme when it comes to an end on 31 October. Here are some key points from the announcement and two examples of how the JSS could work.

More details on the Job Support Scheme, including how to make a claim, will be announced next week. Please keep an eye on our news & insights or LinkedIn pages for updates.

The announcement also included new business grants and an extension to the Self-Employment Income Support Scheme.

Business grants

These are available for hospitality, leisure and accommodation businesses operating in tier two locations and therefore subject to stricter Covid-19 restrictions. Companies can apply for grants of up to £2,100 a month and they will be available retrospectively where higher-level restrictions have been in place for a while.

Self-Employment Income Support Scheme

The grants available in this scheme are being doubled from 20% to 40% meaning the maximum grant will increase from £1,875 to £3,750.

If you would like any further guidance or help working out how the Job Support Scheme could work for your business, please get in touch. 

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The COVID-19 crisis is evolving and the Government's response and the details of support on offer are continuously changing. We'll be updating our posts regularly to ensure our analysis and advice remains as accurate and useful as possible. To receive the very latest information as we release it follow us on LinkedIn.The examples used are to illustrate specific points so haven't been through a full road test and don't substitute advice. Every business is different so please use them with caution and get in touch if you need any further guidance.