The recession and the growth of Internet shopping has meant Sunrise Holidays’ Asif Khan has had to radically change his business.

 

 

 

 

 

Travel is one of the great passions of many Brits, with millions of us jetting around the world every year. But when finances are tight, luxuries like holidays are often the first to go, causing a huge knock-on effect in the travel industry.

British SME reader Asif Khan launched Sunrise Holidays 11 years ago, opening a branch in North London. Five years later, business was booming, and a second, then a third branch were also opened.

“We tended to sell very traditional holidays,” explains Khan.

“Traditional family holidays in the Mediterranean were our bread and butter, and we managed to build up a client base that came back to us year after year – they were cost conscious, but they were generally fairly well off and wanted a bit of luxury for their annual trip. We also did well out of weekend breaks to European cities; we sold lots of romantic breaks to Paris or Venice as well as a few other places.”

But the travel market has changed dramatically in recent years. The tremendous growth of low-cost airlines and online services such as hotels.com mean that many travellers book their flights and hotels separately themselves, leaving the agent out in the cold. “We do hardly any city breaks now, and even the package side has slowed a lot,” explains Khan.

And when the downturn hit, business for these holidays dried up. “Even our wealthier clients became more cost conscious, and while there is added value in using a reputable agent to plan and book your holiday, we have to earn our money somehow – people just decided that it was better to get a cheaper deal by going direct and cutting out the middleman.”

Specialism

Thankfully, however, Khan had already seen the way the tide was turning. Six years ago, he decided to radically change the focus of his business, targeting customers who would value the additional support an agent could bring.

“Essentially, I looked at all the different types of travel and decided to focus on three areas – honeymoon trips, religious pilgrimages and holidays for older people. I thought these three client bases would expect a personalised service and wouldn’t be quite so price sensitive.”

Before announcing his specialisms, Khan spent several months researching the three markets. “While my experience as a travel agent meant understanding the practicalities – booking flights and hotels etc – fairly straightforward, what I really needed to do was learn more about what these types of customers would want from a travel agent.”

Khan read specialist magazines, contacted associations representing the groups and spoke to as many potential customers as possible so he could work out how to tailor his service to them.

“I also had to look at my current staffing requirements. I had a great team of six
people who knew the travel industry inside-out, but none of them had huge experience in selling specialised packages. So I decided to bring in two new people, one of whom had previously worked at an agent that did a lot of honeymoon and wedding trips, and another who had worked heavily on pilgrimage tours. These two ended up being an absolute godsend.”

Promotion

While being specialised is one thing, making sure the market knows you offer the services is another. “The marketing side was the hardest work of the whole change,” explains Khan. “I’d never really used online marketing as a tool before, but I decided to do a lot of Google advertising.

From my research in the market, I’d also got to know a lot of the specialist magazines, particularly on the weddings side. So for the honeymoon part of the business, I placed ads in the ones that I thought were most appropriate. The Google advertising didn’t work as well as I hoped to be honest, mainly because there is so much competition in the market, but two of the magazines I used gave me really good results and I’m still using them now – I reckon I get a return of about five times the advertising cost every time.”

Khan also reached out to the local community by visiting sheltered housing blocks and old people’s homes to give talks on the travel opportunities available to them.

“We’d make a night of it, so I’d bring a couple of bottles of wine and a DVD, and I’d show them all the place they could go.

To start with it was a fairly slow response, but nowadays I still do it and I reckon we get a group booking on more than half of all our meetings – so for an hour or so’s work, I can do several thousand pounds worth of business.”

For the religious groups, online advertising worked the best, but Khan also visited churches, mosques and synagogues in the area. “Where our business is based has a large Muslim population, so I expected to get a lot of people enquiring about Hajj trips, but in fact I do a lot more business from Jewish groups wanting to visit Israel and Christians looking to visit sites around the world – not just Israel, but more far-flung destinations like Ethiopia. A year or so ago a film came out called ‘The Way’, which was about a pilgrim’s journey in Spain and that has done absolute wonders for our business – bookings doubled almost overnight.”

Costs

The biggest cost for a travel agent is staff. “At our biggest, we employed eight people, including myself, full time in the agency, as well as three part time staff,” explains Khan.

“But like many businesses we have had to cut our costs and we now only have two branches, with five full-time staff and two part-time. Thankfully, I haven’t had to make any redundancies, but I just haven’t replaced people when they’ve moved on.”

Payroll is handled by the business’ accountants, who take on the role as part of the company’s monthly service contract. The biggest difference between a travel agency and any other business is that to operate it has to be bonded, so that if it goes out of business, customer monies are not lost. “I bank with RBS, which has a specialist product for travel agents, and it handles the bond for us,” explains Khan.

Because a travel agent is selling holidays – or parts of holidays – on behalf of other firms, large amounts of money flow through the business, with only a small percentage actually going to the business.

“It can be easy to think this money is ours,” explains Khan.

“When you have a good day with payments for bookings reaching £10 or £20,000, it’s easy to think that the office needs a facelift or I could get a dividend, but in fact most of that money goes to the travel operator, so we have to ensure we keep segregated accounts for both our clients and our travel partners so we can keep an eye on exactly how much cash we actually have – this is where our accountants have really helped – they’ve worked with our bank to make sure all the money goes into the right place at the right time, so we’re never getting into difficulties.

The future

“Our three specialist areas are all doing very well, which is good news because our older business types are much more quiet nowadays,” explains Khan. “I want to grow the business – we improved our telephonebased service at the beginning of last year because so many enquiries were coming in from other areas of the country, and I want to continue to build on that. I think my next step will to be to introduce more specialisms – the business travel market is one area I’m keen to get involved in, because commissions can be high on business class airfares, but I’m also looking at walking holidays and ecoadventures as our next niche.

 

The rate of insolvencies fell from 0.11 per cent in December 2012 to 0.07 per cent in January this year – the same rate as in January 2011, according to Experian.

The fall in the UK’s insolvency rate was led by businesses with 101 to 500 employees. Failure rates amongst these mid-sized businesses fell from 0.21 per cent in December to 0.10 per cent in January.

Experian’s latest Business Insolvency Index also highlighted an improvement in the financial health among businesses – from 83.73 in December to 84.01 in January.

While most business segments experienced comparable insolvency rates to those seen twelve months ago, the insolvency rate of firms with more than 501 employees reached 0.20 per cent in January, up from 0.07 per cent the year before.

Max Firth, UK managing director for Experian’s Business Information Services division, said: “The fall in the overall rate of insolvencies has taken it back down to the level it was at a year ago, which is certainly positive. January generally tends to be a good month, with many businesses benefiting from the Christmas trade. When coupled with steady improvements in the underlying financial strength of businesses, it means that we can entertain some cautious optimism for the months ahead.

“The latest data has, however, revealed an increase in the rate of insolvencies for the largest firms. This highlights that despite a positive start to 2012, businesses of all sizes still need to understand the risks they are exposed to and have strategies in place to protect themselves.”

Regionally, firms in Yorkshire led the way with the biggest improvements – from an insolvency rate of 0.15 per cent in December to 0.09 per cent in January. This was followed by London and the South East, from 0.10 per and 0.11 per cent to 0.05 per cent.

The insolvency rate improved marginally among micro businesses (one to two employees), but these businesses have continued to maintain the lowest insolvency rate overall. They also led the month-on-month increase in financial strength, from 84.74 in December to 85.03 in January.

The year-on-year improvement in financial strength, however, was led by firms with 51 to 100 employees, from 81.62 in January in 2011 to 85.57 in January 2012. This was followed closely by businesses with 11 to 25 employees followed by 26 to 50 employees – two of the groups that tend to struggle the most.

Retailers saw little change in sales volumes on a year ago in the first half of February, although they held up better than expected, the CBI has said.

The CBI’s latest quarterly Distributive Trades Survey, which was conducted over the first two weeks of February, revealed that 34 per cent of retailers reported an increase in their volume of sales in the year to February and 36 per cent said they had seen a reduction. The resulting balance of minus two per cent represents an improvement on last month’s survey (-22 per cent) and exceeded expectations (-10 per cent).

Similarly, the growth in the volume of orders placed upon suppliers was better than anticipated, although it remained weak (minus four per cent).

Fortunes were mixed among retail sectors, with grocers reporting significant increases in their volume of sales (a balance of +55 per cent), and non-store retailers – which includes online and mail order – recording +71 per cent. However, other sectors were weaker. Clothing retailers reported -41 per cent, the lowest figure since March 2009 (-98 per cent), while sales of durable household goods (-100 per cent), and hardware and DIY (-90 per cent), continued to fall rapidly.

Price inflation in shops, although above the long-run average with a balance of +49 per cent, is down from its peak a year ago (+73 per cent), and at its lowest since late 2010 (+45 per cent).

Looking ahead, retailers expect the volume of sales to remain broadly flat in March (up two per cent). However, retailers remain concerned about the longer term outlook. Sentiment about the general business situation over the next three months remained negative in February (-12 per cent), for the fifth quarter in a row. Investment intentions for the year ahead are now at their lowest since February 2009 (-43 per cent).

Judith McKenna, chair of the CBI Distributive Trades Panel and ASDA Chief Operating Officer, said: “It’s good to see there are more positive signs on our high streets. But consumers are clearly continuing to focus their spending on day-to-day needs, rather than big ticket or luxury items.

“With disposable incomes under constant pressure, retailers remain concerned about the general business outlook for the rest of 2012.”

Wholesalers beat expectations both on the increase in the volume of sales (+42 per cent) and the volume of orders placed upon suppliers (+36 per cent). While employment rose a little (up five per cent), and wholesalers felt more positive about the business situation (+21 per cent), this was not reflected in firms’ investment intentions (-10 per cent).

In motor trades, sales volumes fell in the year to February (-18 per cent) with sales of new and used vehicles still falling rapidly (-44 per cent), while parts and accessories (up five per cent) helped to lift the overall sector figures. Motor traders felt more negative about the business situation (down six per cent), and are scaling back investment (-28 per cent).

 

Despite tough economic conditions, new figures show that seven in 10 small businesses have introduced new or improved products and services over the past two years, but the economy is preventing six in 10 from achieving growth this year, new figures from the Federation of Small Businesses (FSB) show.

In the ‘Voice of Small Business’ Member Survey, 68 per cent of small businesses have introduced new or improved products or services over the past two years – 15 per cent higher than in 2009 showing that small businesses have been resilient during the downturn. And positively, 58 per cent of small firms said they are looking to grow over the next 12 months – 43 per cent moderately and 11 per cent rapidly.

Of the 11,000 respondents to the survey, three quarters (74 per cent) want to increase their client base, 57 per cent said they expect to increase their online presence and a quarter (26 per cent) want to increase their staff base.

However, two thirds said that economy is the biggest barrier in achieving this, 16 per cent say broadband is a barrier, more than a third (36 per cent) say employment taxes are a barrier and 13 per cent say recruiting and training is a barrier.

The FSB has been calling on the Government to turn words into action and take a giant leap so that small firms can grow. The FSB is urging Government to:

Set out a clear commitment to deploy superfast broadband across all of the UK and say how it will avoid a two-tier broadband access in rural and urban areas

Be bolder in its changes to existing employment law to incentivise employment and think small first when it responds to the Modern Workplaces consultation

Ensure that all public agencies follow the lead of central Government and pay all invoices to small firms within 10 days and that all contractors that the public sector uses pay their sub-contractors within the same time as 41 per cent say cash-flow is a barrier

Bring down the barriers that stop small businesses getting their fair share of Government procurement contracts. Six in 10 of our members say there are barriers for small firms in bidding for public sector contracts

Simplify the tax regime which is a barrier for 38 per cent of small businesses

Promote alternative sources of finance: obtaining finance is a barrier for 21 per cent of small firms

John Walker, national chairman, Federation of Small Businesses, said:

“These figures show that the small business community has remained resilient even in the ongoing tough economic climate. The smallest businesses have remained focused on growth and shown tenacity in bringing new products and services to market.

“With businesses confidence at a low, it is not surprising that the state of the economy is seen as the biggest obstacle to achieving growth over the next 12 months. The Government must take some big leaps and introduce bold measures to drive growth.

“In the forthcoming Budget, the Chancellor must ratchet up the growth agenda by simplifying the tax regime, promoting alternative sources of finance and thinking small first when making changes to employment law. Small businesses are committed and resilient, but they now need the Government to match their ambition for growth.”

 

New research reveals that yob culture is a growing issue for British businesses, causing losses of £9.8 billion last year alone. This translates to an average cost of £4,000 for every single business in Britain.

The study, commissioned by RSA, examines the impact of yob culture on UK businesses in 2011, including incidents such as petty theft, broken windows and doors, graffiti, littering and intimidation or harassment. It also looks at the anticipated impact of yob culture in the UK this year.

The findings show that almost one in five businesses were impacted by yob culture last year, at an average cost of just over £20,000 for each affected business. Broken doors and windows and petty theft were said to be the two most common types of yob behaviour experienced, affecting as many as half of all businesses surveyed. Looking at 2012, 37 per cent of businesses say they expect yob culture to increase as a result of ongoing economic volatility, and employers expect it to cost them more year-on-year at £26,000 on average – a clear indication that Britain’s yob culture is a growing problem.

Commenting on the findings, Jon Hancock, managing director, commercial at RSA, said:

“This research shows that Britain’s yob culture is having a tangible and negative impact on British businesses up and down the country. Whether it’s petty theft, broken windows, intimidation and harassment or graffiti, honest businesses of all sizes and types right across the country are footing the bill for what is socially unacceptable behaviour.

“The importance of businesses preparing for the risks they face and having the right level of protection in place should not be underestimated. This research shows that UK businesses expect yob culture to cost them more this year, so I would encourage all employers to carefully consider how they can protect themselves in order to safeguard the future welfare of their business.”

Although yob culture affects all sizes and types of business, there are significant variations in the scale of its impact. In 2011, yob culture cost large businesses the most at an average of £40,000 and is expected to impact them the greatest again this year at an anticipated cost of £62,000 per business.

There are also stark differences between specific sectors. In 2011, Engineering and Utilities were most likely to be affected; however the cost to business was highest in Construction (£66,000 per business) and Transport (£53,000). This year, businesses expecting to be hardest hit are Utilities (£65,000), Finance & Business Services (£52,000) and Construction (£40,000).

Looking at the eleven UK regions surveyed, businesses in Scotland were most likely to be affected by yob culture in 2011 at 48 per cent, yet the cost to businesses was highest in the Midlands at over £64,000 in the East Midlands and nearly £80,000 in the West Midlands. In Scotland and London, around a third of businesses say they have even considered relocating as a result of the impact of yob culture.