Like many people, I was surprised, and more than a little disappointed by the outcome of the EU Referendum. My surprise actually seems to have been shared even by those calling for a Leave vote – with Nigel Farage originally conceding defeat, and then being ecstatic at the outcome, and only muted voices of triumphalism.
The response, both from the markets, in marking down Sterling and share prices; and from politicians across Europe, in saying that the exit negotiations will be tough and unpleasant for the UK, was almost entirely predictable.
It is no exaggeration to say that the result of the referendum appears to many businesses to be a potential major crisis, which could cause significant damage to their bottom line. The challenge that all businesses now face is to manage the likely loss of consumer confidence and the short term economic impacts of the vote, and prevent longer term damage to their business. The travel industry is one of the sectors, along with banking most immediately in the firing line – collapsing exchange rates, coupled with a loss of consumer confidence are not good news for those who encourage consumers to incur discretionary spend overseas.
As such, businesses in the travel industry should treat the current situation as if it were a crisis, and put in place at least a basic crisis management response. That involves identifying the likely consequences, having a plan to address those consequences, and implementing that plan.
Clearly, the consequences of the decision will vary from business to business, but there are some key themes which will affect many travel businesses, and which will need addressing. It makes sense to divide these into short term priorities – almost the “Do this week” jobs, and then longer term issues which need consideration and planning – and on which the answers are likely to be less obvious.
In the short term, it seems to me that there are 3 major questions which any business leaders need to ask themselves:
- How do we ensure that our customers continue to book for this summer?
- How do we ensure that our staff have confidence we are on top of the situation?
- How do we make sure that we are caught out too much by incredibly volatile exchange rates
There is no doubt that consumer and business confidence has taken a knock since the result, and consumers may be reluctant to book holidays. Therefore, they may take some persuasion, and any business has to identify the opportunities. Those businesses in the mainstream holiday market, particularly if selling All Inclusive, do have a head start. Prices are already fixed for this summer, and with all inclusive, whatever the other questions about the product, the consumer holiday cost is fixed, and it becomes easier to persuade customers that exchange rate differences will not have massive impacts on their overall holiday costs. Similarly, businesses operating to a variety of destinations need to consider whether some might be less affected by the Sterling slump, and may therefore be better value for money.
Likewise, staff in travel businesses are likely to be viewing the situation with some nervousness. If they see slow trading, they could easily be concerned as to their future employment. It is vitally important that your teams all believe that the business is on the front foot, and that you know what you are doing. Labour MPs are demanding a new leader because they suspect that there may be a general election in the near future, and want to have confidence that they may do well – so want their leader to be strong and decisive. Your staff are the same – and want to know that you are in control. In crisis situations, regular staff updates help demonstrate that leadership – even simply telling them that you have put in place a process to understand and manage the issues is a positive message.
Exchange rate volatility may be more of a problem. A week on from the referendum, Sterling is trading at 8% down on its close on the 23rd June against the Euro, and 9% down against the Dollar. That’s not good news if you are paying for products in those currencies, and if you have not already hedged against currency fluctuations. I talked to someone shortly after the referendum who was so confident of the result that they had sold off their personal Dollar stock, in the belief that Sterling was going to strengthen – a somewhat unfortunate decision, and probably one which should teach us all not to believe polls or commentators! If you have been caught out, your best hope is to be cautious in relation to currency, and not to over-commit, in the hope that there will be some recovery. As I have no crystal ball, please do not take this as investment advice, as it could easily be wrong!! Get advice from those professionals who may have a better view in this area.
So, once you have addressed your short term issues, what comes next? The first point to note is that even after any initial steps, the short term isn’t going away, so you will have to keep repeating your short term actions.
You then need to turn your mind as to what may happen in the longer term. The challenge is that there are, at the moment, far too many unknowns. We don’t know what a post EU world will look like for Britain. Will we be part of the European Economic Area, like Norway, will we have a free trade agreement like Switzerland, or will we have less formal arrangements? The outcome of those major political decisions will determine the economic future, and without even knowing what way the politicians are thinking, it’s difficult to plan for the future.
You can at least start thinking about the parts of your business which may be affected, form the structural questions, like where you should best base your business, to how you employ staff, through to the more trivial issues, will you need to worry about work permits for staff working overseas? Simply thinking about those questions is useful, and making sure you engage with others who are asking similar questions also makes sense. This goes as far as questioning whether you need to update your sales plans for future seasons.
So, even though we are in a period of massive uncertainty, travel businesses can still emerge with their bottom lines and reputations reasonably intact, but they do need to take the issues seriously, and plan accordingly. As the philosopher once said, he who fails to plan, plans to fail – and in the current situation, this is patently true.