Risk Management
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Flying High: How to Survive in the Aggressively Competitive Travel Industry

by Antoni Rami, Co-founder, Kantox

Contributing £106bn to the British economy, tourism is a key driver of wealth and jobs in the UK. However, as with many industries, the travel sector has faced a prolonged period of change in recent years. Many forget that this sector was one of the first to feel the impact of the digital revolution. Over time, online aggregators have dramatically driven down prices and driven up competition. Traditional tour operators, who work with printed catalogues and have a seasonal pricing policy, have struggled to keep up. By operating 100% online, the latter benefit from the flexibility of setting their rates daily, which gives them a competitive edge in a market that is extremely sensitive to even marginal price differences.

Aided by this added flexibility, online travel agencies (OTAs) have captured a 15% share of the market globally and compelled many traditional operators to compete by rolling out online business offerings that are gaining increasing prominence within these companies’ overall activities.

Further disruption is headed in the direction of the travel industry, in the wake of Brexit. Questions over whether the UK will remain a part of the single aviation market are causing concerns among a number of major airlines and many travel operators are having to adjust their forecasts in line with the potential decline in European travel.

It is not just the future of movement across borders that is causing concern for the sector. By nature and definition, all companies in the sector operate in various markets and currencies – and are impacted by currency volatility. We saw the pound drop to its lowest level in recent history upon news of Brexit, which will have hit operators hard if they did not take necessary precautions in advance.