Comment: The industry has a moral duty to build responsible business models

Comment: The industry has a moral duty to build responsible business models

Travel offers opportunities to challenge the norm, but the wider industry must ensure that unsustainable business models do not go unchecked, says Oliver Brendon, chief executive of ATD Travel Services

Am I alone in feeling rather uneasy when reading regular reports about award-winning companies with high-profile owners which go bankrupt owing vast sums to suppliers and, as often as not, leaving customers stressed and stranded?

The travel industry is different from most others in two crucial respects. First, travel companies usually have a positive cash flow: they take money from customers before, and often well before, having to deliver the product or service.

Secondly, the average basket value is large, so it is relatively easy to grow revenue into the tens of millions, if not hundreds of millions, by “piling them high and selling them cheap”. But the owners of travel companies who adopt this pricing strategy have a duty to secure their funds and protect their customers.

It is generally their legal, and always their moral, responsibility to be regulated, to have a sustainable and commercially viable model and to maintain a strong balance sheet.

Yet all too often travel companies continue to trade, sometimes for extended periods, using their high revenues and positive cash flow to support themselves when they are effectively bankrupt – or, as they sometimes call it, “seeking investment”. At the root of the trouble is human vanity.

When I read about commercial failures and, indeed, triumphs, I am invariably reminded that business is not so much about balance sheets and profit and loss accounts but rather about individuals and the forces that motivate them.

It is about the inventiveness that fuels a tech start-up, the passion to exercise power, the fear of failure, the burning ambition to get rich and the pride in success. Often too, it is about the insatiable ego that pushes a chief executive into a crazy acquisition or the greed that allows him, or her, to syphon off customer money.

When this ego or that greed go unchecked or unregulated in the travel industry, where the opportunity for financial malpractice is so alluring, the almost inevitable consequence is unpaid suppliers, customers out of pocket and company failure.

Of course, business bankruptcies are inevitable in a buoyant, entrepreneurial economy since no venture would ever get off the ground if its founder was too timid to take the occasional risk. Furthermore, some ideas don’t work, some companies can’t keep up with the pace of change and sometimes they fall victim to external circumstances.

However, what is especially distasteful in our industry is that we frequently provide platforms for the owners of businesses which don’t stand up to scrutiny in terms of financial stability or commercial common sense.

Of course, it is not always easy to determine when companies are over-trading, or even when they begin selling £10 notes for £9.  But more effort should be made.

If owning a company incurs responsibility, then travel industry bodies and indeed the press have a responsibility too. Every effort should be made to subject companies to background checks, more investigation and due diligence before giving them exposure or rewarding them for success which is ultimately unsustainable.

Such self-serving and self-congratulatory behaviour detracts from the credibility of what are often excellent travel industry awards, events and conferences, so we must all play our part in ensuring it does not go unchecked.

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