Will More Travel Industry Bankruptcies Happen?

Jun 24, 2022

While there's no doubt that the travel industry is facing serious financial problems, this doesn't necessarily mean that there will be more hotel bankruptcies. Historically, this isn't the case. During the past two years, hotel bookings have risen sharply and many companies have faced financial challenges. However, the lack of bookings led to cost-minimization decisions. Many of the hotels near theme parks and other national attractions have struggled to maintain pre-pandemic occupancy levels. In the meantime, hotels compete with the likes of Airbnb to fill vacant rooms.

Carlson Travel recently filed for Chapter 11 protection in the U.S. and obtained approval from lenders and owners. The plan will eliminate half of the company's debt and inject $350 million in new equity capital. It will also spend some of this money on a new technology platform. As more companies file for bankruptcy, it will likely lead to more consolidation of the travel industry and higher costs. However, many companies have been hit by the recession and are not likely to regain their former levels of performance in the near future.

In the meantime, the industry must assess its competitive landscape after the bankruptcy. The timetable for recovery is unclear, but companies must be prepared to enter new markets and compete to retain customers. Companies should understand their new customers, analyze customer behavior, and identify the right prospects. In the near term, the travel industry's survival is dependent on the ability to restructure itself and adjust to the new environment. There is a possibility that some major brands may even choose to file for bankruptcy as a last resort.

Depending on the type of insurance you buy, the right to a refund or a voucher may be affected by the rules of bankruptcy. Some policies, however, may not be able to provide coverage if the airline or ticket agent goes bankrupt. In such a case, the money paid is considered unsecured by the travel company and the consumer may be last to receive compensation. It's important to do your homework and avoid companies that aren't financially stable.

When it comes to a travel brand going bankrupt, the best thing you can do is focus on your customers and diversify your business. During a global economic crisis, many travel brands will find themselves in financial difficulty. While recovery won't be uniform, the impact of the disease will be felt in different parts of the world. Because of this, domestic travel may recover quicker than international travel. Meanwhile, other countries will open up for business sooner than others.

In Greece, for instance, Thomas Cook, one of the largest tour operators, is facing bankruptcy. The company was a partner of more than 80% of local hotels. The result will affect 80 to 100 million euros in tourism. When it announced bankruptcy, about 20,000 to 22,000 tourists were stranded on Crete. However, travelers covered by ATOL are automatically repatriated. A further reason for bankruptcy may be the rise of cheaper flights and online travel websites.