• Top tips for travel businesses as travel unlocks this summer
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Top tips for travel businesses as travel unlocks this summer

21 April 2021

After a year that most in the travel industry will want to forget, there does appear to finally be some sunshine on the horizon. The smooth progress so far against the government's roadmap gives cause for optimism both for consumers hopeful of a summer holiday and travel companies keen to attract bookings.

On 12 April, domestic travel reopened in the UK and recent government announcements offer encouragement that international travel will be possible from 17 May, albeit with a potential traffic light system applied to mitigate the risks of overseas travel.

While the immediate booking response to recent Travel Taskforce announcements has been relatively subdued, if the current positive progress is maintained there will be cautious optimism that there can be some recovery in the market this summer. Businesses that have managed to maintain stronger balance sheets and are feeling more confident about the summer ahead, may even have half an eye on the prospect of a future transaction.

However after a year of intense cash flow management and reliance on government support schemes, returning to travel has the potential to offer even greater challenges to many travel companies than they have faced in the last year. With this in mind, we set out five areas that should be on the agenda for many management teams in the coming weeks and months.

Assess your overall funding

The key to taking full advantage of the opening of the travel market will be having sufficient funding.  Whilst The Coronavirus Business Interruption Loan Scheme (CBILS) closed for new applications from 31 March 2021, Rishi Sunak has announced the Recovery Loan Scheme to take its place. UK businesses of any size can apply for a loan or overdraft between £25,000 and £10m until the end of 2021. Shareholder investment should also be considered where possible.

Be proactive with the Coronavirus Job Retention scheme

The near-term and key challenge for many will be ensuring there is sufficient cash in the business to pay salaries as people return to work.

However, with the risk of future liabilities for illegitimate claims it will also be important to have maintained the appropriate records and a look back at previous CJRS claims submitted during the last 12 months, particularly at the pay elements being used to calculate reference pay, maybe well worthwhile.

We have been helping many clients to review their Coronavirus Job Retention scheme (CJRS) claims, including those where HMRC have opened active enquiries into claims. It is important to take proactive steps to review your own calculations, so that if an error is identified, any amounts can be made good with HMRC on a voluntary basis, to avoid any potential penalty or interest issues. The new CJRS legislation also includes powers to publicise defaulters online and to pursue company office holders where businesses become insolvent, with joint and several liability.

Have a clear picture of deferred payments for suppliers and HMRC

Aside from government support schemes, many companies will have negotiated with HMRC, landlords and other suppliers to conserve cash. Future cash flows will be impacted by deferred payments in the short and even medium term. While these will be critical to manage in the short term, any lender or investor will also want to have a clear picture of the underlying cash generation of a business.

If historical discounts or deferrals were negotiated in exchange for future price increases then these must be captured appropriately in any forecasts.

Consider the most effective marketing channels

The queues on the high streets when shops re-opened were at odds with the idea that we have fully transitioned to a nation of online shoppers, but there is no doubt that consumer behaviours have changed in the last 12 months. As companies seek to drive bookings, directing limited cash to the most effective marketing channels will be vital.

Review regulatory requirements

Complying with CAA regulations or similar will remain a challenge for many businesses. As ever, engaging in conversations early with advisors and/or the regulator gives the best opportunity to find a satisfactory solution and maximising use of the available funding.

For further information on any of the points mentioned above please contact Richard Crisp, Associate Director and Tony Nygate, BDO Partner.