2020: The big issues are achingly familiar

2020: The big issues are achingly familiar

The new year is a time to look to the forwards. At least it should be. Sadly, as we return to our desks after the Christmas break, the three largest issues that will shape the immediate future look achingly familiar.

Brexit will be back at the top of the agenda in January. Yes, we’ve all had our fill,  but while the UK voted overwhelmingly to “Get Brexit Done” there’s still plenty of this particular turkey left for sandwiches. Assuming the latest Withdrawal Agreement Bill is passed and we leave the EU on 31 January, we then begin the long process of haggling with Brussels over trading terms. Much like their namesake’s sprouts passing through the alimentary canal. It will be slow, it will be painful and it’s sure to be explosive.

Secondly, Thomas Cook (TC) continues to ruffle feathers.  Many in the industry are still struggling to cope with the impact. In the immediate aftermath, cash flow is the biggest problem throughout the supply chain as lost commission income and the cost of replacing or refunding holidays bite. So far, it looks like we’ve made it through this phase better than expected with no further material failures.

Further challenges lie ahead, though when the true financial impact is disclosed in agents and operators’ annual financial accounts. Those accounts will be scrutinised by the CAA, ABTA, IATA, Insurers, lenders and credit card companies.  Demands for additional security will butt up against severely diminished insurance and lending capacity resulting in some very tough conversations at the March and September licence renewals.

Meanwhile, the UK’s remaining Goliaths will attempt to carve up the 2.5m former TC passengers. January has always been a pivotal booking month, accounting for up to 20% of all summer holiday bookings. Early signs are that all of the lost TC capacity will be immediately replaced as Tui, Jet 2 and EasyJet pile on new programmes.

Thankfully, these groups are financially healthier than TC has been, so we should see more rational pricing behaviour in 2020. Nevertheless, the summer holiday market is likely to remain oversupplied, putting pressure on everyone’s margins.

Finally, environmental concerns jumped up the agenda in 2019 and the scrutiny of our industry will only intensify. While it represents the biggest risk to the travel industry over the next decade, it also represents a huge opportunity for the Davids to triumph against those Goliaths.

Increasingly, consumers are motivated by identity, values and emotion, and are seeking brands with purpose. Movements like the B Corporation are growing in influence, with well-known consumer brands like Ben & Jerrys, Danone, Ella’s Kitchen, and Innocent Smoothies all certified. Waitrose has even trialled “B Corp Only” aisles in their online store.

Whereas traditional capitalism was all about profit, and maximising shareholder return, B Corps must demonstrate a positive impact in all areas of their business, from governance, workers, environment and community. Currently only 2 UK travel businesses are certified B Corps, though I expect many more may apply as a way of it to differentiate from the competition.

Besides being good for the planet, operating with a clear, articulated sense of purpose has many commercial benefits. It builds trust and loyalty with customers, it can help you attract and retain talent. It may even help you attract investment: a number of private equity houses now run dedicated “Impact Funds”, investing exclusively in businesses with an environmental or social conscience.

Worth thinking about when setting your new year’s resolutions!

Written by Martin Alcock for the  Travel Trade Gazette on 6 January 2020

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