Are travel agencies worth it
The German travel agencies, tour operators and reservation service providers were able to achieve sales increases up to and including 2019 and were on a growth path. They benefited from the good economic situation in the business travel market and from the Germans' desire to travel in the private customer business, which was unbroken for years due to the persistently good situation on the job market, rising incomes and positive consumer sentiment. This ensured a high level of holiday demand: in 2019, 55.2 million Germans took 70.8 million holiday trips and spent € 69.5 billion (+ 3.6% compared to the previous year). The travel agencies and tour operators, through which 55% of all trips in Germany are booked, benefited from this; 37% of them stationary and 18% online (9% via online travel agencies and 9% via tour operator portals).
In the corona crisis, the travel agency, tour operator and reservation service provider is one of the most severely affected sectors in Germany. The intensity of the business failure in the travel industry can be rated as very high. On a scale from -3 to +3, the travel companies surveyed in the Ifo Business Survey in June 2020 rated their exposure to Corona with -3.0 points, the worst value. For the economy as a whole, a value for corona exposure of -1.4 was determined at the same time. The ifo business survey in January 2021 once again confirmed this worst value in the travel industry. The proportion of companies that initially stated in March 2020 that they were suffering from the negative effects of the corona crisis was 96.9% among travel companies. That was the highest value of all the industries surveyed. In June, according to the ifo survey, 85% of companies in the travel industry were struggling to survive. The state regulations on contact bans and exit restrictions, domestic and foreign travel warnings and temporary border closings for travelers have made travel largely impossible and thus deprived tour operators and travel agencies of their working basis.
The corona pandemic has almost brought tourism in Europe to a standstill. If you still want to travel, you have to know the respective entry regulations and rules on site. Lockdown rules vary, hotels are not allowed to offer overnight stays for tourist purposes, tourist visas are only issued in exceptional cases. Travel restrictions often change at short notice, depending on the incidence figures, which are often suddenly changing, or other changes. In Bavaria, for example, in January 2021, the so-called 15-kilometer rule applied in many cities and districts with an incidence value of 200 or more, which stipulated that people must not move more than 15 kilometers from their place of residence. On January 26th, 2021, the Bavarian Administrative Court temporarily suspended this regulation due to the lack of clarity of the norms in the express proceedings.
The travel agencies and tour operators have to reverse the canceled tripsin which they have already invested consulting and sales work, both without payment. Agents often only receive commissions when they start their trip or they have to repay commission payments that have already been made. In addition, the travel company must reimburse the holidaymakers for the price already paid for the canceled trips within two weeks. Many travel companies try to incentivize customers to voluntarily accept a voucher solution instead of accepting refunds in order to maintain liquidity in the company. In spring 2020, the federal government planned a mandatory voucher solution, but this initially failed due to the veto of the EU Commission in April. Since July 30, 2020, the "Act to Mitigate the Consequences of the Covid-19 Pandemic in Package Travel Contract Law" has given tour operators the opportunity to offer their customers state-guaranteed vouchers instead of a refund for canceled package tours. In the event of the tour operator becoming insolvent, the travel vouchers are additionally protected by the state, for which the tour operator must pay a guarantee premium. For this purpose, the Guarantee Premium Collection Ordinance came into force on October 20, 2020. In the opinion of the EU Commission, the additional state safeguarding of the voucher solution constitutes state aid within the meaning of EU state aid law. The voucher solution was only approved by the EU Commission on the condition that the organizers guarantee a premium. A substantial part of the voucher value is already covered by the existing insolvency insurance for package tours - the state insurance only has a supplementary effect.
Immense loss of sales
According to projections by the German Travel Association, companies in the travel industry have lost more than 80% of their turnover, which corresponds to an order of magnitude of 28 billion euros for 2020. Accordingly, the financial situation in the industry is extremely tense, and bankruptcies are often the result. The longer the crisis lasts, the greater the need for finance. Customers are hesitant to make new bookings as travel restrictions continue to change. As a result, there is also a lack of liquidity in the company. Trips are more likely to be undertaken within Germany or in neighboring countries. The trips in German-speaking countries are often booked individually without the help of intermediaries and organizers.
The assessment of the intensity of the business failure also includes the assessment of whether or not it is possible to catch up with the business transactions. In the case of the services of travel agencies and tour operators, this is only conceivable to a very limited extent. A crisis-related loss of income is irretrievably lost and catch-up effects are only possible to a limited extent. In a special question from the Ifo Business Survey from April 2020, 75% of the companies surveyed did not assume that they will ever be able to make up for the decline in sales, 25% hoped that this will be partially offset at a later point in time. In January 2021, the travel companies expected on average that their business situation would have normalized again in the most likely case in 12.6 months. Even in November 2020, 85% of the companies surveyed in the travel industry answered that the adverse effects of Corona were a threat to their very existence. Despite the suspension of the obligation to file for insolvency, bankruptcies have already increased. In 2019, 65 insolvency proceedings were opened, and from January to October 2020 134 proceedings were opened, 32 of which were rejected due to lack of funds. An incipient wave of bankruptcies could lead to a consolidation in the travel agency and tour operator market. The Federal Government's Tourism Commissioner Thomas Bareiß assured in November 2020 that the Federal Government was making intensive efforts to cushion the economic effects in order to create prospects, and he emphasized that the desire to travel after the pandemic would be greater than ever Give courage. Nevertheless, not a single company assumes that it will be able to completely make up for lost sales due to the corona crisis. The longer the crisis lasts, the greater the drop in sales will be.
The risk of performance failures due to a lack of staff is classified as medium. In the travel agencies and offices of tour operators and reservation service providers, distance regulations and hygiene measures could be observed when advising and selling a trip. In addition, advice and sales could be carried out by staff who are present in the travel agencies, and they could also be increasingly handled by telephone, online or by e-mail - also from the home office. Rather, the problem with the travel industry lies in the product being sold itself, the trip and the travel services included such as the journey (bus, train, flight, etc.), the overnight stays, the care of the tour guide, visits to sights or events, etc. First of all, it would have to be clarified how the distance to other tourists can be maintained .
New business models only to a limited extent
Opportunities for the development of new market opportunities in the sense of new business models that are only emerging due to the corona crisis are only seen to a limited extent for the travel industry. Traveling is and will remain a physical experience - at least this applies to private customers. As long as Corona travel restrictions apply, new travel offers must be based on the containment measures and the applicable distance and hygiene regulations. “Holiday Distancing” - offers without long queues at the buffet, without crowds at pools and beaches and fully occupied travel vehicles would make the travel market much smaller and make travel much more expensive for the end customer. Opportunities for the travel industry experienced in consulting could well arise due to the high need for information regarding the many applicable Corona regulations. Many people wishing to travel are unsettled because of the corona pandemic and with the abundance of corona regulations that apply worldwide, for example on entry and quarantine regulations, wearing a mouth and nose cover and rules on visiting restaurants or sights (for example via online Tickets) overwhelmed. The travel agencies and tour operators can distinguish themselves here with one of their core competencies - sophisticated travel advice. Of course, this is only possible if travel agencies are allowed to reopen.
Permanently fewer business trips
The business travel market will be replaced to a certain extent by video conferences and digital events in the wake of the digitization surge that the entire economy is currently experiencing. With the resulting new business models, however, German travel companies will not be able to earn their money. On the contrary: The German travel agencies, which on average generate almost 30% of their turnover on the business travel market, are being confronted with the structural adjustments and changed behavior of the companies: As a consequence of the corona crisis, 57% of all companies participating in the Ifo business surveys plan to permanently reduce their employees' business trips (ifo Business Survey, Special Question May 2020). This makes corporate bankruptcies particularly likely for travel agencies specializing in business travel.
The sales of German tour operators and travel agencies have risen continuously since 2005. Like the entire tourism industry in Germany, the travel industry can be described as a growth industry. In the past, travel agencies and tour operators benefited from the Germans' love of travel; In 2019, travel expenses rose again by 3.6% compared to the previous year. The most important travel destination for Germans is Germany with a share of 27%; 73% of all vacation trips are abroad (Spain, Italy, Turkey, Austria, Greece etc.). With the outbreak of the corona pandemic and the containment measures taken (travel warnings, border closings, exit restrictions, etc.), the order backlog of the approximately 2,500 travel agencies in the tourism sector recorded in the Tats travel agency index collapsed. The total cumulative billed travel agency turnover in the months from January to December 2020 is minus 77.6%. Tourism recorded a minus of 74.7%, air traffic recorded a minus of 82.8%. The other sales show a minus of 64.1% and the number of tickets a minus of 79.2%. The cruises segment recorded a decrease of 71.4%. The travel agencies, tour operators and reservation service providers participating in the Ifo business survey also reported an enormous slump in demand for travel services in the fourth quarter of 2020. Over 80% of the companies surveyed believe that their business activities will be affected by a lack of demand at the beginning of 2021.
The collapsed demand for travel and the large number of travel cancellations resulted in a drastic drop in sales in 2020. Figure 1.According to a survey by Urlaubspiraten.de, three out of four Germans traveled in the summer of 2020 despite travel restrictions, and almost one in two did so, shows how much sales of both tour operators and travel agencies fell in 2020 compared to previous years Vacation in Germany. With 72% the car was the preferred means of transport. As reported by the Federal Statistical Office, there were 39.0% fewer overnight stays in Germany than in 2019. The number of overnight stays by guests from Germany fell year-on-year by a good third (-33.4%) to 270.3 million. At 32.0 million, the number of overnight stays by guests from abroad was almost two thirds (-64.4%) lower than in 2019. The total invoiced turnover of the travel agencies recorded in the Tats-Reisebürospiegel (approx. 2,500) was in December 2020 compared to the same month last year at -86.6% (sales with tourism: -90.0%; with air traffic: -90.2%; with other sales: -63.2%; number of tickets: -90.9%; Cruises: -84.7%). A member survey conducted by the German Travel Association (DRV) on August 27, 2020 among around 650 member companies comes to a similar result: 70% of travel agencies put their sales at less than 25% of the previous year's sales. Almost 50% of travel agencies state that they have already laid off employees or that they are likely to have to do so. Against this background, it is not surprising that over two thirds of all respondents describe their situation as threatening their very existence. When the travel industry was not included in the Corona aid package in November 2020, the DRV exerted sharp criticism and even announced a lawsuit. An industry check by the DRV on December 8th, 2020 showed that 77% of the tour operators and as much as 84% of the travel sales companies have applied for corresponding state support payments. In addition, 42% of the tour operators took out KfW loans; in the case of travel agencies, only 25% rely on the money borrowed from the state. Tax deferrals and special aid from the federal states have also already been applied for by companies in the travel industry.
In terms of future sales, it looks only a little better. After the assessment of their future sales by the travel agencies, tour operators and reservation service providers participating in the Ifo business survey had deteriorated drastically in March and April 2020, sales expectations only improved slowly by the end of the year, but did not reach the pre-crisis level at the beginning of 2021. In the travel months in spring and summer 2021, according to Tats-Reisebürospiegel, sales are likely to remain over 90% below the level of 2019. Compared to the previous year, in which the pandemic began, the decline is likely to be smaller. The proportion of those companies that see their business activity being hindered due to financing difficulties skyrocketed in 2020 and was still 18% in the 4th quarter of 2020. In January 2021, as part of the Ifo business survey, companies were also asked at what point in time they expected their business situation to normalize. Travel agencies do not expect a normal business situation for another 12.6 months. According to the ifo survey, only accommodation establishments with 13.2 months are more pessimistic.
In the summer of 2020, the travel industry complained about the lack of it Planning security, because 160 countries were lumped together with the global travel warning. It was said urgently that the Foreign Office had to return to differentiated travel and safety information. This central requirement of the travel industry has been met again since October 1, 2020. This means that regions or countries can be viewed or described more precisely and tour operators and potential travelers can make individual decisions based on facts and responsibly. Nevertheless, the travel industry will have to struggle with the restrictions and negative economic consequences of the corona pandemic for a long time to come. The phase in which unrestricted travel will once again take place worldwide will not occur until 2021 at the earliest if it is possible, as planned, to vaccinate against the coronavirus across the world.
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