Lack of Consumer Spending Is One of Greatest Threats to Agencies

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Last year saw $1.9 trillion spent on outbound global travel, according to GlobalData. Economic downturn, political instability and a global pandemic are reducing both the ability and willingness to travel, severely affecting consumer spending for 2020. Ultimately, all companies are at risk amid the outbreak of the coronavirus (COVID-19), as financial performance is entirely dependent on the direct spending of consumers; however, travel intermediaries, including travel agencies and advisors, are among those most at risk.

According to GlobalData’s latest figures, $166 billion was spent on travel intermediation in 2019, which is equivalent to 8.7 percent of global expenditure. More was spent on transportation ($472 billion), retail ($461 billion) and accommodation ($325 billion), but lack of expenditure across these sectors will have a roundhouse effect on travel intermediaries.

Johanna Bonhill-Smith, travel and tourism analyst at GlobalData, says “companies with a steady financial performance, operating through a multi-branded strategy and high cash reserves” are in the best position to weather the storm. As numerous operators now seek additional credit to stay afloat, companies with steadier financial performance are more likely to receive credit. Travel players that also operate through a multi-branded strategy are likely to encounter quicker financial recovery due to servicing a wider market base. Additionally, those with a higher operating cash reserve are likely to be in a better position to outlast the effects of an exogenous event such as COVID-19.

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Bonhill-Smith adds, that, despite a significant drop in share prices lack of demand, OTAs are in a better position than traditional in-store travel agencies “as more customers opt for an online booking platform over face to face interaction.”

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