'Hibernation' is one option facing travel agents right now 'Hibernation' is one option facing travel agents right now

Agents’ dilemma: To hibernate or move on

Travel agents looking to survive through tough times with no fixed date of remedy are increasingly looking at putting their business into ‘hibernation’ and the various ways they can fund this.

Paul Davies, of Oneteam Chartered Accounts / TA Accounting, says agents are faced with making the tough decision between shutting down the business or keeping it in survival mode.

‘The travel industry will come back but realistically people are looking at putting their business into hibernation for at least nine months or a year.

‘One thing to look at is the Government secured loans – those businesses taking a long-term view would be able to pay it back over two or three years and carry on. If things don’t work out the business would only be liable for 20% of the loan.’

Davies says the tax measures announced this week by Finance Minister Grant Robertson will certainly help many travel businesses, as most had a strong year in 2019-2020.

‘It’s an anomaly in the tax system that has been amended he said, where if a company has a profitable year it has to pay tax, then it makes a loss and may wait years to get the benefit. The law changes will allow an estimated loss for the 2020-2021 year to be written back to 2019-2020 year, saving tax and producing refunds of tax paid.’

Davies says people will be deciding if they can hibernate for six to 12 months with no staff, the same period with minimal staff, or just work independently.

He says agents should, if they haven’t already, ensure they are financially prepared and take a number of steps.

‘Claim the government subsidy and get your accounts up to date. Review all costs and reduce where you can, and prepare a budget, cash flow. At this time this should probably be for two years.’ Then get some funding on board.

He says at the moment only a very small number of travel agencies seem to have made the tough decision to close completely.

‘Travel is going to come back, even if we are facing a new normal. If we could get some sort of bubble going where we allowed travel between safe destinations, that would certainly help.If some travel businesses drop out of the race, there will be more of the ‘cake’ for those left in.’

paul@oneteamca.co.nz

 

 

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