STA Travel, a European travel agency with 52 global offices has gone into Administration in the UK, a bankruptcy death sentence. Is it the first domino to fall?
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STA Closes Its Doors
A major travel agency in Europe focused on students has gone into administration. While the business was based in several locations across Europe, the UK offices have gone into administration as have its headquarters in Denmark and Australia. Almost immediately, the website was shut down and the employees let go. STA began as Student Travel Australia but altered its name to Student Travel Association. Its model was to operate on the “high street,” retail locations in high foot-traffic areas.
Is STA the first of many dominoes to fall? Travel Agencies are far more prevalent in Europe. Our experience booking in the UK was that going to a travel agency was seen as the proper way to do things while booking yourself online was gauche. Large US agencies like AAA and Liberty Travel have diversified and are more insulated than retail-only agencies so they may be able to survive this terribly challenging time.
Over 70% of Travel Agencies Will Close
One industry lobby group (ASTA, American Society of Travel Advisors) has said that without the distribution of billions of dollars in small business loans to agencies, up to 77% will close. It’s not a matter of new funding nor of approval for those locations but rather that the money simply has not been distributed to this point. Many won’t be able to wait for funds to arrive.
I’m unsure how true that number really is because it’s posed by a lobby group tasked with obtaining the best possible result for its customer base, travel agencies. As such, if seven in ten are set to close, that may scare lawmakers into protecting a number of small businesses and the people that depend on them but puts the number in doubt for me.
That said, travel agencies have major challenges. The majority if not all reservations have been cancelled but for travel agencies that really mean twice or three times the work (cancelling, re-booking, and as the situation prolongs, re-booking again.) Further, there’s no new money coming in so the problem is exacerbated. Almost all travel agencies are small-businesses and the majority are female-owned according to Forbes.
“Ninety-eight percent of U.S. travel agencies are small businesses, and over two-thirds of them are owned-operated by women. There are nearly 15,000 retail locations in the U.S., employing over 108,000 people, plus an additional 40,000 self-employed travel advisors.”
Many will close, I personally know of some that have shut their doors already.
Who Will Fill the Void?
Ignoring the 70% number for a moment, but assuming that the losses will be substantial, there will be a void created. There’s a lot of pent up demand for when the doors of the world re-open, but with far fewer options for agencies, those that stay open will add new clients and new agencies will crop up.
For mega-companies like STA and Thomas Cook (another European travel agency that went into liquidation last year), there are competitors to serve the market, but new players will have to emerge. Companies like EF Tours may step in to fill the educational gap.
That said, companies like Liberty Travel may also remain hesitant to expand as markets re-open despite the opportunity. Mega-agencies have been strained, have likely eliminated some personnel, and may not be in a position to expand despite customer acquisition opportunities.
Conclusion
While I seriously doubt ASTA’s assertion that 77% of all agencies will fail without PPP/EIDL funding, I do believe a large swath won’t survive. STA will leave a void for others to grow even in a time where travel is at staggeringly low levels. Other large travel agencies with significant overhead will also struggle and likely collapse. Some of the void will be filled by other agencies, but new ones will also rise.
What do you think? Is STA’s collapse a bellwether? Is it just the first of many? Will the travel agency model stabilize?
Isn’t liberty owned by Flight Centre Travel Group?
I think
You mean exaggerate not exasperate
Exacerbate, not exasperate
It’s surprising that more didn’t go under before COVID; I haven’t used an agency for personal travel for 20 years, and can’t imagine a situation in which it’s advantageous to do so. Perhaps Ma and Pa booking a package deal to Bali or Majorca or Cancun, but for others..no.
The other big Australian agency , Flight Centre, also with international operations, is closing hundreds of storefront outlets.
The hotel chains and airlines will renew and redouble their efforts to screw down the agencies on commission, just as soon as they believe a sustainable recovery is in sight.
A bleak future for traditional agencies…
The vast majority of travel agents, at least in the US, have long made the majority of their income from selling cruises and package tours, the two products that still are willing to pay travel agents decent commissions. Booking individual air and hotel were considered ancillary business by most agencies and provided with a surcharge or as a favor to customers who also booked the more profitable cruises and package tours. Most people now book individual air and hotel directly with the suppliers online.
Unfortunately, When the Cruise and package tour businesses come back, they may be forced to go this route, saving the money they have paid in commissions to travel agencies, even though they will have to spend a lot more on advertising. Sadly, A lot of travel knowledge will be lost.
WorldStrides here in Charlottsville, VA filed for bankruptcy.
https://dailyprogress.com/news/local/charlottesville-based-worldstrides-files-for-chapter-11-bankruptcy-protection/article_3523e445-aae6-5d82-857b-ae9d433c74b9.html