Lowcost Group collapses

News broke late on Friday(15th July)that the Lowcost Group had ceased trading and called in administrators.

Though the recent Brexit vote, and resulting financial turmoil was blamed for the collapse, in truth the group had been experiencing financial challenges long before June. Pressures in core holiday markets like Turkey, rising costs of pay per click Google advertising and a notoriously price sensitive customer base meant that the Lowcost Group was operating on very low profit margins with little reserves to cushion the impact of a shock. 
Warren Buffet used to say that when the tide goes out, you can see whose been swimming naked. Well Brexit was the tide.
Lowcost Holidays had a very public falling out with the CAA back in 2013 and took advantage of a controversial loop hole in the ATOL regulations that allows companies established in other EEC member states to sell into the UK without the need for ATOL protection.
Lowcost Holidays relocated its head office to Mallorca and was regulated by the government of the Balearic Islands, who offered a significantly cheaper way of complying with European Package Travel regulations. The CAA warned customers back in 2013 to be cautious about booking with the Lowcost Holidays. Their move was widely condemned by the travel trade at the time and has formed the basis for many a discussion as other businesses considered similar moves.
We understand that there are currently 27,000 customers overseas. Whilst repatriation shouldn’t be an issue (most flights will have been paid in full) many customers will be asked to pay again for their accommodation in resort. 
For the 110,000 poor customers who have not yet departed, their summer holiday plans lie in tatters and the Balearic scheme is unlikely to be able to cope with the volume of refund claims. 
There are wider complications too. Many travel businesses sold flights together with product, sourced from Lowcost Beds as a B2B wholesale supplier. 
Under Flight Plus rules, they are now faced with a stark choices. They must either find their customers an alternative bed with little chance of reclaiming any already paid. This could prove very expensive given well publicised capacity shortages in Spain and other “safe” destinations. Alternatively they will have to offer a full refund of the hotel as well as the flights and car hire making this equally costly an option.
While the CAA will have no involvement in helping consumers of Lowcost Holidays, they will be watching closely with fingers crossed that the failure of Lowcost Beds doesn’t cause a domino effect of other travel business failures.


The 2 things you need to know about the ATOL Reporting Accountant scheme

On 1 April 2016 the CAA’s ATOL Reporting Accountant (ARA) scheme officially went live. Here are the 2 things you need to know and the next steps you need to take to make sure you comply.
1. What is an ARA?

The scheme was first announced back in 2014 as part of the CAA’s Rebalancing ATOL consultation and is part of the CAA’s wider attempt to educate accountants on the details of the ATOL scheme and to improve the quality and reliability of the information they report.

To qualify as an ARA, accountants will have to register with their governing accountancy institute and must pass the online CAA test similar to the ATOL Accountable Person test.

Going forwards, all ATOL reporting must now be signed by an ARA.

You can find more information on the ARA scheme on the CAA’s website.



2. What do you need to do?

First things first, you should immediately check the CAA’s published list to see if your accountant is already registered as an ARA.


At the time of writing, there were over 400 registered ARAs but if your accountant is not one of them, you have 3 options:

A. You can ask your current accountant to register as an ARA with their institute. The requirements and costs for your accountant of doing this will vary depending on which institute they belong to, and how big their firm is. They will need to sit a test, and they are likely to need to pay additional fees to their institute.

B. If your current accountant is unwilling or unable to register as an ARA, you could appoint an ARA solely for the purposes of signing off your CAA forms. We understand some of the ARAs listed on the CAA’s site would be prepared to do this.

C. If neither of these options is suitable, you will need to appoint a new accountant. Bear in mind that the engagement process can take time to set up.
Whatever option you decide, be sure to act quickly. From 1 April 2016, the CAA will reject any ATOL reporting unless they are signed by a suitably qualified ARA and they are unlikely to renew your ATOL at your next renewal date.

One size doesn’t fit all – 6 ways to recognise revenue in the travel industry, and 3 things to consider when assessing your options

Henry Ford once famously said of the Model T ford you can have any colour you want, so long as it is black. He didn’t believe in variety and his products came to epitomise the production line approach to producing one-size-fits-all consumer goods.

The modern UK travel sector is pretty much the opposite of one-size-fits-all. Holidays come in all shapes and sizes and so do the travel firms that sell them.

Take agent vs principal for example. Once upon a time, life was more straightforward. The principal was the tour operator who owned the aeroplane and the hotel. Meanwhile the travel agent was the one in the high street shop surrounded by brochures.

These days, things are a little more complex: There are specialist tour operators and commodity travel agents; luxury differentiators and mass market bucket shops.

It can be very difficult to work out who is who in the transaction, and with sometimes more than a year between a customer booking a holiday and returning home, there are many potential trigger points in the sales cycle when revenue could be classed as “earned”.

Hardly a surprise then, that recognising revenue is such a hot topic in the travel sector.

Taking a different road

In practice, we see our clients use many different recognition policies. The range is almost as wide as the variety of holidays they sell. Here are the 6 most common, in chronological order:

  1. Booking date – the most common among agency related revenue but certainly the more aggressive recognition policy as a principal. To mitigate the risk of cancellation as a principal you would expect there to be a cancellation provision in place.
  2. Deposit / final balance split – the customer deposit is recognised at date of booking and the remainder on departure. Difficult to administer and dependent on terms and conditions.
  3. Non-cancelable / refundable –  a common trigger for recognition is the point at which the holiday becomes 100% non-refundable to the consumer. Arguably a point at which the right to consideration passes, though recent court cases challenging excessive non-refundable deposits may call this into question..
  4. Supplier / customer final payment – revenue is recognised at either the point at which the customer pays the final balance, or when suppliers’ have been paid in full. The timing of each can vary and the right to consideration is not as clear as when non-refundable.
  5. Departure date – considered to be the industry standard when acting as a principal.
  6. Return date – certainly the most prudent basis, but not a popular one for obvious reasons.

The road map to recognition 

Financial Reporting Standard 5 (FRS 5), Application Note G gave some guidance on when to recognise revenue but it could also be interpreted in many different ways. The recent introduction of FRS 102 doesn’t exactly narrow down the options.

The fact is, there is no straight forward answer to the correct policy but here are 3 key points that could help you determine the most appropriate measure:

  1. Whose booking terms and conditions are in use? –  does the company act under the terms of an agency agreement, or are sales covered by their own terms and conditions?
  2. Which regulations apply? – The Package Travel Regulations and/ or ATOL Regulations may give the company additional responsibilities and potential liabilities. If so, maybe recognising revenue close to departure is more suitable.
  3. What are the cancellation terms? – If recognising revenue in advance of departure, is there a sensible cancellation provision? What level of non-refundable deposit is collected, would it protect the gross margin?

Ford’s production line approach certainly yielded a consistent output, and though its unlikely we’ll ever see consistency in the accounts of the travel industry, its certainly worth a look to make sure your policy is on the right road.

Staying afloat in times of uncertainty

Warren Buffet once said that when the tide goes out, you can see who’s been swimming naked.

It was a typically wry observation from the Sage of Omaha. It reminds us that companies are at the mercy of events outside their control, and that the true strength of a firm is only apparent during adverse conditions. 

Right now, the tide feels pretty far out for the travel sector. November was another low point in a difficult year as once again, some of tourism’s most popular destinations went into lockdown. The atrocities in Paris felt a bit too close to home, terror and confusion closed down Sharm El Sheikh, foiled attacks in Tunisia have all but wiped out demand in North Africa, even sleepy old Brussels became a battle-ground. The British holidaymaker’s already fragile confidence took a battering, and bookings were reported to have fallen by as much as 25% in the last weeks of the month. 

The big question is, can our travel firms cope? Traditionally the sector has been thinly capitalised. As a consequence, it has been able to survive short, sharp, shocks but may well be unprepared for a prolonged downturn. Many still live off their customer’s money, relying on tomorrow’s deposits to pay today’s bills. Some are still too highly geared, with big financial commitments to cover.  If they’re not quite swimming naked, certainly some are looking pretty vulnerable in their budgie smugglers. 

As we enter December, all eyes will inevitably turn towards the 2016 peak booking period. Habits have changed over the years, and thankfully January isn’t the make or break month it once was but the statistics still consistently show its importance. Some holiday firms may hope to secure more than 20% of their annual customers in that single month, and to collect a fair chunk of cash too. In times of uncertainty, the natural customer response is to delay making a decision.  Lets hope things improve before we reach that point. 

Except, hope isn’t really much of a strategy is it? 

Unfortunately, detailed scenario planning isn’t something I see too regularly outside the largest travel firms. All too often, budgeting amounts to little more than adding a bit onto last year and crossing fingers. Tracking performance starts and ends with comparing against prior year. 


Theres no doubt we’re heading into further uncertainty in 2016. We should all hope for the best but plan for the worst. The act of detailed financial planning is absolutely vital to understanding the key drivers of performance. Knowing which costs can be cut and which levers can be pulled if cashflow tightens.
Whether swimming in your wetsuit or naked as the day you were born, if you dont know your break-even points and your red lines, how do you know if you’re floating on the surface, or already under the waves?  

This article first appeared in TTG on 3 December 2015 

A Tailor-Made tale: the importance of a personalised experience


At a recent travel industry event I got chatting with a retired gentleman, let’s call him Bert, though obviously that isn’t his real name. During the conversation, Bert told me something excellent.

During his career as a travel industry executive, he had always spent a lot of time in transit.
It was important to him that he always had interesting reading material to pass the time, but he had a wide range of interests and no single publication could hold his attention for very long.

So Bert came up with an ingenious solution. Every time he saw an article in a newspaper or a magazine that looked like it would vaguely interest him, he would cut it out and put it in a box by his font door. Then anytime he was heading out on a journey he would reach into the box on his way out of the door, and grab a handful of random articles to take with him.

Now of course, its tempting to pigeon-hole this as another story about quaint things that older people do. Like the one about my friend’s parents who didnt know how to set the clock on their microwave so they sat up till midnight before turning the power on.

But i think it has more to offer than that. Here are a few other things I love about this story:

First I picture the 7 crates stuffed full of random, unread cut-outs piled up in his garage, spanning decades, each article totally unrelated to the next; I feel the faint strain these boxes place on Bert’s personal relationships. “I need to keep them ALL” he’ll say, when Mrs Bert begs him to take them to the dump. “Well, read faster or take the slower train” she would probably say.

Next, I like to imagine the rollercoaster of emotions he will feel when, on some future train journey he will finally discover that Marathon has changed its name to Snickers, Eldorado didn’t get a second series and the Falklands War has ended.

Above all, though, I think it serves as a cautionary tale of an increasing trend in the consumer and leisure sector: that people want to be able to curate their own unique experience by cherry-picking the bits that interest them and discarding the rest.

Nowhere is this more prominent than in travel. Whether you are an agent, tour operator, airline, or hotel, the one size fits all, “cookie-cutter” approach is increasingly difficult to get away with.

As consumers become more discerning in their tastes, they are seeking ever more unique experiences and they are willing to pay good money for the privilege too.

Travel companies with these characteristics typically earn much higher profit margins than their undifferentiated peers. It’s also no coincidence that in the last 12 months, investors have paid big money for brands that can deliver unique, tailored experiences at scaleable volumes.

As a final thought, I like the fact that 20 years before the smartphone, Bert basically invented Pocket, the successful app that works like a high-tech version of his boxes.

The widespread availability of simple, accessible, intuitive technology can now make Bert’s search for that unique, customised experience far easier, quicker and cheaper – yet another cautionary tale for the travel sector.

This article was first published in TTG on 15 October 2015

Last minute ATOL renewals and how to avoid “The List”

Egg timer

We’re well into the business end of the ATOL renewal now, and the deadline for travel firms to satisfy any final requirements, and renew their ATOL is just a frantic few days away. Those who don’t make it on time face the very public humiliation of a period on the late renewal list- the CAA’s equivalent of the naughty step which is published on the CAA’s website for all to see.

At best, being on “The List” is an irritation you can do without but at its worst, the resulting brand damage can knock the confidence of your suppliers and customers and really hurt your company.

Here, Travel Trade Consultancy Manager and ATOL expert, Simon Brodie gives you 5 essential tips to help you renew on time and avoid finding yourself on The List.

1. Read and re-read your offer letter

By now, you should hopefully have received an offer letter setting out the terms you have to meet to renew your ATOL.
Make sure you read and re-read the offer letter and understand precisely what the CAA are asking you to do: Do you have to provide a bond? Do you need to pay fees or will they be collected by Direct Debit? Does your accountant need to submit Annual Returns? Are you being offered a 6 or 12 month licence?

All of the conditions outlined on the offer letter must be addressed and unless you have delivered everything, your ATOL will not be renewed.

2. Get Proof of delivery on everything

Whilst certain documents can be submitted by email, the CAA will want to see original versions of bonds, guarantees or other legal documents.
The postal service can be unreliable and the CAA’s own post room starts to resemble the Lost Property office at the Tube during the renewal period.

At TTC, we always hand deliver all of our clients’s documents or send them by recorded delivery or courier so there is indisputable evidence when something has been delivered.

3. Don’t forget to pay your fees 

Your renewal fees must be in the CAA’s pocket before they will renew your ATOL – unless you’re already signed up to pay by Direct Debit, in which case well done you! Your fees will be collected the week after renewal.

Paying by Direct Debit is undoubtedly the best way to go because it reduces the hassle factor and costs you less -the CAA charges a lower fee if you pay both your renewal fees and your ATOL Protection Contributions (APC) by Direct Debit. If you want to sign up, you can obtain the necessary forms from your usual contact at the CAA.

If you don’t fancy DD we always advise our clients to pay by bank transfer and obtain proof of payment.  Whilst cheque payments are still accepted by the CAA they can and do go missing. Plus they’re a bit 1980s.

4. Don’t assume. Get confirmation

The CAA do not automatically confirm when you have satisfied all of their renewal conditions but if you ask politely, your case officer will be able to tell you.

This is  particularly sensible if you are relying on third parties such as your insurers to provide bonds or your accountant to provide independent confirmations. Providing all documents remains your responsibility and many ATOL holders have come unstuck because they assumed documents that were sent would arrive on time. Remember the old saying: “assumption” is a mother and she has children.

5. Check the list

The CAA publishes “The List” on its website on 1 October and 1 April so if you really want to go belt-and-braces, check your company name isn’t on it. There have been instances in the past where companies thought they had met the conditions only to find out they hadn’t when it was too late.

If you do find yourself on The List, you should speak to your case officer to understand what you need to do to get off it as quickly as possible.

Travel Trade Consultancy provides advice,  services and support to businesses in the travel sector specialising in matters related to ATOL. Next time, why not join over 200 other ATOL holders and let Travel Trade Consultancy handle your renewal for you? For more information, see our website.


Clutching at straws: Looking for good news in a challenging environment

Its fair to say that so far, this summer has not been a vintage year for the travelling public: Sousse, Corfu, Athens and Calais have all seen travel on the front pages for the wrong reasons and there were 2 more stories trending in the travel press last week that brought into sharp focus the contrast in risk of booking packages versus DIY.

 On Thursday Thomas Cook Group (TCG) released their third quarter trading update. Set against the current backdrop they weren’t a bad set of financial results in the grand scheme of things: profits were up, net debt was down and trading was more or less in line with last year. What grabbed the headlines though, was the extent of the financial cost borne by the group following the tragic events in Tunisia.

TCG revealed it had spent around £20m evacuating some 15,000 of its customers from Tunisia to other destinations. Though undoubtedly a footnote in the overall story, the group acted swiftly and its commendable actions went some way towards repairing a reputation battered by the mishandling of the Corfu debacle earlier this year.

Elsewhere this week, news broke that International Villas, a UK based villa rental company operating mainly in Ibiza and Mallorca had gone into voluntary liquidation.On the face of it, International Villas looks a pretty small failure, with a relatively small number of people affected though that will be of little consolation to those poor families who’s holiday plans are left in tatters.  Of course any failure at this peak time of year is bound to garner a disproportionate level of coverage, and so it was in this case where mainstream media picked up the story. To add insult to injury, the company only sold accommodation and was therefore not legally required to hold any sort of licence or offer financial protection, leaving those affected with valid flight tickets but nowhere to turn and little alternative but to pay again for somewhere to stay.

As an interesting aside to the collapse, some media outlets speculated that the Spanish tax authorities had issued proceedings against a number of similar businesses for unpaid local taxes. If this is true, could it be the first signs of a more combative approach from the Spanish tax authorities after so many years of looking the other way while accommodation providers and private owners ducked their tax obligations. Only time will tell, but there are sure to be some nervous expats watching with anticipation.

As the rain continues to batter most of the UK, and we move further into the lates market, these stories tell two contrasting tales of woe. The latter a cautionary tale of the perils of DIY and the merits of ATOL; the former a grim reminder of why its safer to book with a regulated tour operator. It may be clutching straws to look for good news in all of this, but they should at least help to boost the popularity of the Package Holiday.

This article was first published in the TTG on 6 August 2015