Relaxing travel is a travel agent that is based in the UK. The main area of business of this company is medium-priced charter flights and package holidays to resorts which are mostly in the Mediterranean coastal resorts. The products that this company offers include; charter flights which it leases from a variety of companies, and package holidays. However, this company is facing serious challenges following the economic downturn in the UK. On top of this, there have been other factors that have posed a big challenge to the business operations of this company and they include;
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- Regular customers have been creating their packages using budget airlines and the internet to book their accommodation
- In the last year, there have been several problems with air travel including the volcanic ash cloud and airport strikes.
- Recent fluctuations in exchange rates have meant the price of accommodation worldwide has been impossible to predict.
- Several other competitors from other stronger economies have been competing with the company forcing up some of the hotel prices.
Measures to be taken by the company
The following section is going to give recommendations to the management of this company regarding the appropriate measures that need to be undertaken in order to overcome this unhealthy situation by the company. These recommendations are based on the secondary research that was carried out regarding this issue from the internet.
One of the best options that need to be considered by Relaxing Travel is to merge operations with any other company or companies in the industry that shows potential to grow. This will enable the company to overcome the difficulties that are associated with the economic gloom. The company should shut some of its branches. Such a move enables a company to cut down its costs (Oreg, 2010). It is quite hard for this company to generate substantial profits while operating as an independent company in the industry in the situation in which it is currently. The company should borrow from the initiative that was taken by TUI travel in which it merged with First Choice in the year 2007 (Anonymous, Tour operators: Take-off or grounded? 2010). Following this merging, the company reported a high profit of over 65 Million US dollars in the third quarter of the year 2008. Big companies that are more diversified can be able to spread costs across other businesses in a manner that the companies that are small can not (Anonymous, Tour operators: Take-off or grounded? 2010)
By Relaxing Travel merging with another company or companies in the industry, it will not only be able to cut down the costs but will also be able to trim away heavily discounted. Unprofitable products as well as those activities that are not profitable and will as well be in a position to attain more buying power as a larger operator (Dooley, 2010).
Given the scenario in the Relaxing Travel Company, merging will enable the company to overcome most of the problems that are facing it. For instance, since the costs will be cut, the company will be able to deal with the competition that is brought in by the companies from strong economies in the industry pushing up prices. More so, the company will not incur great losses that are brought in by such incidents as the strikes at the airport and the volcanic ash clouds which may force the company out of business.
In order to overcome the problem of regular customers creating their own packages using budget airlines and the internet to book their own accommodation, there is need to put in place aggressive promotional strategies (Anonymous, Tour operators: Take-off or grounded? 2010). The company should seek a chance to convince the customers to make use of the services of the company instead of booking by themselves. In the case where the company has charged customers higher prices, the company should seek to make the customers be aware of the justification behind it (Castle Resorts & Hotels, 2010). This will serve a great role in retaining the customers and winning their loyalty and even acquiring more customers.
Dealing with the fluctuation in the currencies
Since the company faces challenges that are posed by the recent fluctuations in the exchange rates causing the world accommodation prices to be unpredictable; appropriate moves need to be undertaken in order for the company to avoid making losses. This risk can be managed through hedging. This is carried out through “forecasting exposure in the main currencies with which a company is trading, that’s company can obtain a sound level security and therefore avoid both costly forex fluctuations sting and having to pass on unfair surcharges to clients” (Anonymous: Forex hedging, Para 3). The negative aspect is that the business organization or company is attached to the forward contract rate and in the case where the local currency can come to be strong then this will leave the company to turn out not to be competitive at the quotation stage. To find a solution to this, the company is supposed to give room for a feature of flexibility in the predictions to allow for those circumstances that come about on an occasional basis in which a booking can be discounted slightly to carry out the sale.
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Based on the recommendations, the Relaxing Travel Company is supposed to take some steps to operate profitably. It is recommended that the company consider merging to broaden its base to overcome challenges. More so, the company should engage in promotion to maintain its customers and to even gain more customers. To deal with the fluctuating exchange rates, the company is supposed to engage in hedging to avoid losses that may result from this problem.
Anonymous, 2010, Forex hedging: forex hedging tutorial and strategies. Web.
Anonymous, 2010, Tour operators: Take-off or grounded? Web.
Castle Resorts & Hotels, 2010, Agent Promotion and Fam trips.
Dooley, G., 2010, United-Continental Merger: Do agents have a dog in the hunt? Web.
Oreg, M., 2010, Liberty travel Alliances. Web.