Introduction
Relaxing Travel 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 the company and they include;
- Regular customers create their packages using budget airlines and the internet to book their accommodation
- There have been several problems with air travel including the volcanic ash cloud and airport strikes in the year that has passed.
- Recent fluctuations in exchange rates have caused the price of accommodation worldwide to be impossible to predict.
- Several other competitors from other stronger economies have been competing with the company forcing up some of the hotel prices.
Following these challenges, research was conducted to come up with appropriate recommendations whose implementation can enable this company to
Overcome the challenges and operate profitably. The report that has been compiled after the secondary research being conducted has been prepared for the management of the Relaxing Travel Company and by using this report, the management will be able to come up with the right decisions to keep the business running most efficiently and effectively possible. I conducted the secondary research about how the companies in the travel industry overcome challenges that are similar to those that are currently facing Relaxing Travel
Procedure
In this research, secondary sources were used to gather information that could be helpful that can be utilized by the management of Relaxing Travel to come up with appropriate decisions in order to enable the company to remain competitive in the market. Basically, initiatives taken by the companies in this industry operating in the UK having similar operations as the Relaxing travel were looked at. The largest operators in this industry were considered in regard to the move they took for them to remain profitable in the market despite the economic gloom. These big operators considered including TUI, First Choice, Thomas Cook and MY travel. Information about these companies was obtained from the internet from the site which is cited in the bibliography. This search was to help find a solution to the problem of economic downturn in the UK, dealing with the high prices brought in by the competitors in the strong economies and dealing with the problem of strikes at the airport and other unpredictable unfavorable circumstances. To find a solution to the problem of fluctuating exchange rates, there was a search for information about this issue on the internet in regard to the initiatives that have been undertaken by companies in this industry to deal with this problem in order that they may not be greatly affected negatively by the unpredictable world accommodation prices. The information was obtained from the cite which is also found in the bibliography. More information was also obtained from the other three sources that are indicated in the bibliography which was helpful in drawing conclusions and making recommendations.
Findings
Cutting down costs through merging and shutting down some branches
Following this secondary research, it was established that the big companies in the UK in the travel industry went on making bigger profits even there was an economic downturn. For instance, the TUI Company made a profit of over 65 million US dollars in the third quarter of the year 2008 (Biz/ed, 2010). It was established that this was realized through the move that was undertaken by the Company to merge with First Choice Company. More so, it was established that Thomas Cook Company Merged with My Travel Company making the companies more profitable and turning out to be able to deal with the economic gloom. These mergers resulted in two UK’s big two instead of the initial big four (Biz/ed, 2010).
It was also established that in a situation where economic conditions are not very favorable especially where there is an economic downturn, companies may opt to shut down some of their branches (Liberty Travel, 2010). This move may accompany the move to merge. These moves are meant to cut down the costs of the company and also to trim away those unprofitable products that are heavily discounted. This will also enable the company to acquire more buying power as a bigger operator (Dooley, 2010). As it was established, by companies merging, they will be able to deal with competition resulting from other companies in the industry pushing up their prices since by the companies merging, they can cut down their costs and can be able to compete by using price as a strategy in the competition. The companies will also be able to deal with uncertainties that may come threatening to force the companies out of business because they will not incur bigger losses.
Promotion
The research was also carried out regarding the issue of the regular customers creating their own packages using budget airlines and the internet to book their own accommodation. It was established that for any company to overcome this problem, it had the responsibility to engage in promotion. The company is supposed to make a move to look for an opportunity to convince its clients to make use of the services that are being offered by the company and not to engage in booking by themselves. Any higher prices that are charged for the services offered by the company should be justified by making the customers know the rationale being the company’s pricing (Anonymous, Travel and tourism promotion, 2010).
Hedging
More so, another problem that was investigated is the issue of the unpredictability of the world prices in accommodation brought about by the ever-fluctuating exchange rates. Companies in this industry were looked at in terms of the moves they take in situations where there is this problem. It was established that the companies engaged in hedging to overcome this problem. It was established that the companies in this industry were supposed to allow for an aspect of flexibility in the predictions they make for them to allow for those circumstances that occur occasionally under which a booking can be discounted in a slight manner to carry out the sale (Forex Hedge, 2010).
Conclusion
Following the research that was conducted in regard to the moves that are supposed to be undertaken by a company in the travel industry to overcome challenges that accompany an economic downturn and other challenges that threaten the company’s successful operation; the company may have an option of merging with another company or companies to cut down the costs so that it may remain competitive in the market. The company may also engage in promotion to avoid losing its customers. To deal with the fluctuating exchange rates that bring about unstable prices that can not be predicted, the company may deal with this risk through hedging.
Recommendations
Based on the literature that has been obtained from the research conducted, it is recommended that the Relaxing Travel Company take the following moves to deal with the problems that are facing it;
- Consider merging with another company or companies to cut down costs and widen their base
- Close some of its branches with also an intention of cutting down the costs
- Engage in promotion to avoid losing customers
- Engage in hedging to deal with the risk of fluctuating exchange rates
References
Anonymous, 2010, Travel and tourism promotion. Web.
Biz/ed, 2010, The big two. Web.
Dooley, G., 2010, United-Continental Merger: Do agents have a dog in the hunt? Web.
Forex Hedge, 2010, Foreign Exchange Eur- Usd Live Chart – Foreign Exchange and the Travel Industry. Web.
Liberty Travel, 2010, Liberty Travel Alliances. Web.