Could you extend the reach of your business to minimise risk exposure? Financial and regulatory expert, Matt Purser – Director of the Firebird Partnership – gives his latest take on the issues facing the travel sector, with a look at taking trade beyond British borders.
Many of us are used to the phrase “spreading your risk,” but while a number of us will associate it with the investment of pension funds, we aren’t necessarily skilled at applying the concept to our own businesses.
“Not spreading risk sufficiently can be catastrophic”
Over my three-plus decades in travel, I have seen many examples of companies not spreading their risk sufficiently. In some cases, that approach was catastrophic. These examples include a travel management company (TMC) persuaded to drop its range of corporate clients for a single, large global client who looked set to provide them with so much business that no other clients seemed necessary. During the 2008 recession, their one global client decided to stop all travel – which promptly led to the failure of the TMC.
Then there was the tour operator which bought all of its air seats through Monarch. They were left with a huge financial hole when Monarch ceased its trading, and the seats they had already paid for disappeared.
Elsewhere there were numerous operators who appointed Thomas Cook as their agent, and who were therefore exposed when the company ceased trading, leaving them open to risks with the pipeline money. There have been agents exposed due to the failures of other major operators, too, losing all their commission when refunds were given to the consumer.
“Spreading risk doesn’t always cost more money, and it can spark big opportunities”
Let’s hope that those who survived these events learnt their lesson, and are no longer vulnerable to the losses of stakeholders in the same way. For as tempting as it is to work with fewer companies overall, spreading the risk by using different suppliers is the most logical thing to do.
Spreading risk doesn’t always cost more money, and it can spark big opportunities. No one in the industry could have foreseen a global pandemic in which the whole world closed its borders, but one area it has proved wise to monitor is the speed at which various countries returned to travel.
One of those countries was the USA, where a large number of residents were willing and able to travel sooner than those in the UK. This, combined with the current strength of the dollar, means we are still seeing larger traveller numbers than usual from the States to Britain, Europe and beyond. Travel businesses that had US clients could therefore return to profit sooner, even when their UK-based clients weren’t ready or able to travel.
“There is a giant market out there stretching far beyond the UK. Why not ‘spread your risk’ and start selling to non-UK clients?”
You might so far have missed the opportunity to work with the US market, but there are still plenty of chances to collaborate with clients whose home currencies have gained strength this year. The price of flying is affecting many people around the world, but for some the cost in resort represents the best value it has ever been. This counts not only for travellers from the US, but Australian citizens too. There is a giant market out there stretching far beyond the UK. Why not “spread your risk” and start selling to non-UK clients?
Granted, expanding overseas is not a straight-forward process. You need to consider your terms and conditions, the risk of accepting payments in other currencies, the limits of your insurance, and whether or not you need to be licensed in that country to do business. Tackle those issues, however, and the potential for growth is massive.
The travel sector has battled through and survived the toughest of times. We now need to make sure we are primed and able to take advantage of all the opportunities out there, in order that businesses can thrive again.
Matt Purser is a Director of the Firebird Partnership, and has worked in travel since 1989, beginning with ATOL at the Civil Aviation Authority. There he was instrumental in scoping out regulatory changes to protect consumers. In 2005, he set up the Travel Trade Consultancy (TTC) and helped grow it from a start-up to a million-pound-turnover business. Matt is an expert for the Finance & MI and Regulatory modules of Firebird’s Foundations for Growth programme.
Learn all about the programme, and get in touch with Firebird, at www.firebirdpartnership.com
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