One in three companies in the UK Tour Operators industry are making a loss according to new research from market analysts Plimsoll, with many finding it difficult to pass on the pain of cost inflation to their customers as competitive pressure is restricting their pricing power.Lead analyst and author of the new analysis, David Pattison, said: “Whether it's fuel, materials or wage demands every company in the UK Tour Operators industry is being squeezed by ever increasing costs. Some 50% of companies have seen their gross margin fall in the latest year. Unfortunately, many are reluctant to pass on price rises for fear of losing customers to cost savvy competitors.
However, falling profit margins across the industry is the first warning sign that this strategy has become unsustainable.
“Over the past two years the average profit margin in the UK Tour Operators industry has fallen to 1%. More worryingly, 301 companies are losing money with 168 of these doing so for the second year running. These companies face a tough decision – protect their market share and continue to lose money or adjust their prices to reflect their increased costs. Without refocusing on the bottom line, many of these companies will simply run out of cash.” Pattison says that it’s not all bad news as many companies are getting it right.
He said: “Some 381 companies have managed to actually increase their profit margins over the same period. In all , 699 companies have managed to stay in the black despite rising costs. Clearly, operating profitably in the UK Tour Operators industry is difficult but not, as yet, impossible”. Readers of Travel Bulletin are entitled to a £50 discount of the new edition of the analysis.
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