Are You Prepared for an Economic Slow Down?  OCTOBER 2015

“The latest NZIER Quarterly Survey of Business Opinion shows the New Zealand economy losing momentum. The drop in activity indicators in the June 2015 quarter points to annual growth remaining below 3% over the coming year – a marked drop from the 3.5% annual growth we saw at the end of last year.

Business confidence fell to the lowest level since September 2012. Since the Global Financial Crisis, businesses’ activity expectations have outpaced actual activity. However, it appears businesses have now moderated their activity expectations to be more consistent with the softening demand environment.

That said, on a nationwide basis a net 13% of businesses still expect an improvement in their own trading activity over the next quarter. Expectations have fallen – but from lofty levels.

The effects of lower dairy prices are evident, with some dairy-intensive regions such as Southland, Waikato and Canterbury seeing a net number of businesses expecting a worsening in conditions ahead.” NZIER 7 July 2015.

We should expect that consumer spending will decrease and this will reduce the demand for Travel and Tourism in 2015/2016.

What can Travel Business’s do to counteract the economic effects of these changes?

If sales of travel services decrease in 2015/2016 then Travel Business’s can counter act this by:

1. Increasing margins on the bookings they do receive

2. Looking at ways of improving productivity within the office

3. Managing and reducing costs

Each of these measures will need to be implemented with a definite system that is going to be followed by all staff within your office.

How can you increase your margins in 2015/2016?

  • Set your own price – what do you consider is an acceptable level to price your services?
  • Airlines will be discounting to fill their seats so package an airfare with land product that is not readily available in the market place.
  • Have a checklist of additional services that you can offer with every airfare – hotels, rental cars, theme parks, insurance, fx, transfers, tours, upgrades? Make it compulsory to offer these as part of the sale.

How can you increase productivity in 2015/2016?

  • Train your staff to use the systems that you do have to their maximum advantage – streamlining your reservations, bookings, and documentation systems could results in more than a 20% saving in time.
  • Copy the systems that work for the most productive staff member.

How can you manage and reduce your costs in 2015/2016?

  • 40 – 50% of travel business costs are staffing so implement a reward scheme that they all benefit from.
  • Review your major variable costs – credit card fees, telephones, advertising – is there a cheaper way of buying these services or re-charge them where possible.

An economic slowdown may be good for your business?

There is no doubt that when you are busy you have to focus on production – getting the documents out and meeting your clients travel needs.

What happens when business slows down – you have more time – time to focus on some of the things that you may not have addressed over the past couple of years.

Your relationship with the clients – how much do you know about your clients and their travel plans?

Time to review your business plan and expenses.

Time to address the difficult issues – are all your staff really suited to the job that they are in?

Time to decide whether you should really be in this business. If you have not been profitable over the past three buoyant years – should you still be in business?

Take the time now to address these issues now and your business will be in much better shape when the economy picks up.

CHECKLIST

  • Cut out unnecessary overhead
  • Prepare budgets and forecasts that can be monitored monthly
  • Set staff targets and expectations of performance.
  • Prepare marketing plans that focus on the best return for the $ spent.
  • Put in place monitoring systems to follow up enquiries and quotes.
  • Implement pricing systems to ensure that margins are maintained.
  • Look realistically at earnings and reducing your drawings accordingly.

This must be good for their business’s and so in some respect a slow down gives us the time to address some of the underlying systems that are necessary to run a good business.

Have you addressed these issues in your business yet?

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