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.
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?