Stockport travel firm takes steps to survive effects of Covid-19

Stockport travel firm, On The Beach, has issued a statement outlining the measures the business is taking to see out the coronavirus outbreak.

On The Beach has renewed its revolving credit facility, providing £50 million, which is normally only used to manage seasonal variance in working capital. The Stockport travel firm has also announced that its board of Directors have voluntarily agreed to a 20% reduction in salary and fees, no bonuses would be paid this financial year, and the Group CEO, Simon Cooper, will forgo his salary.

The group outlined that its asset light business model, where it has no fixed commitments to fill airline seats or pre-booked hotel rooms, and the fact that customer payments are ringfenced until the point of travel, indicating the Stockport travel firm believes it is well placed to survive the pressure faced on the sector at a time when flights are grounded and travel heavily restricted worldwide.

Since February, On The Beach has taken additional steps to manage risk of the progressing coronavirus crisis, including reducing marketing spend to near zero, and limiting other expenses. The Stockport travel firm estimates current monthly cash costs have been cut to less than £2 million.

Simon Cooper, Chief Executive of On the Beach Group plc, commented:

The travel industry is prone to shocks: global recessions, natural disasters, terrorist attacks, and major airline failures to name a few. A closure of airspace was deemed inconceivable during contingency planning for a no-deal Brexit, but we now find ourselves in a position where airspace may be closed for a number of months due to the spread of COVID-19, and the travel industry needs to brace itself for a potentially prolonged period of significantly reduced, or even zero revenue.

“On the Beach was created with an asset light model to ensure its survival in the inconceivable market conditions in which we now find ourselves. Unlike the majority of larger tour operators, online travel agents and airlines, all OTB customer funds are held in a ring-fenced trust account so that if the scenario above prevailed and all forward bookings were to seek a refund of their prepaid holiday monies, in the main this could be facilitated without impacting Group cash. This is not the case across the industry where customer funds are often held on balance sheet and if refunds were requested en masse, the funds would not be available.

“Against the backdrop of the impossible market conditions in which we find ourselves, the resilience of On the Beach’s asset-light and flexible business model becomes clear. The benefits of using a trust account structure (as opposed to the use of customer funds for working capital), become obvious, for consumer protection, for the financial stability of the business, and ultimately for the protection of the taxpayer. It would appear obvious that, as an industry, we need to reflect on financial protection and on how we can make our industry robust enough to withstand future shocks.

“In the days leading up to the closure of airspace, we were able to put a detailed plan in place to ensure that we are best placed to deliver operational and customer service excellence throughout this difficult time. As a technology company, we are also well placed to facilitate remote working for all of our staff. I am hugely proud of the efforts of everyone at OTB and would like to praise the dedication of my colleagues who have been working around the clock to provide the very best level of support for our customers.

“Whilst the coming months will continue to present a huge challenge, I look forward to the multitude of opportunities which lie ahead.”