COLLAPSE OF GOLDRAIL

Causes behind the collapse of an SME in a Tourism Company - A case of Goldrail



Causes behind the collapse of an SME in a Tourism Company - A case of Goldrail

Introduction

The Global Travel Arrangement and Reservation Services tourism industry has been affected by the decline in domestic and international travel across most major developed countries over the past five years. The decline even spread to developing regions as the global recession took hold. There was some improvement in travel movements, in 2010, but growth was tempered by continuing concerns of unemployment (Meyercord, 2010). The improvement is expected to continue through 2011, with the tourism industry revenue forecast to increase by 3.6% to $649.4 billion. Overall, tourism industry revenue is expected to grow by an average 0.8% per annum over the five years through 2011.

About 16,000 British holidaymakers have been stranded in Greece and Turkey, and 150,000 others were forced to cancel their vacation plans after their tourist operator, the UK company Goldrail, declared bankruptcy. This discussion will explore both the internal and external influences on Goldrail as well as evaluating a range of recommendations that could have been incorporated to avoid the collapse of the company.

Internal & External influences on Goldrail

The competition in the industry is continuously increasing. It is driven by prices and changes in tariffs on account of the extensive quantity of SMEs and small number of internationally operating firms (Altman, Kant & Rattanaruengyot, 2009). There is marginal trend in the margin of net income. Factors such as location, level of tourist activity and number of business travelers also plays a significant role in increasing demand. This also influences the ratings of hotels as well as the service quality in the hotels (Fox, 2010). In addition, quality of the service and the level of comfort in the hospitality plays an important role (Nelson, 2010).

For some travelers, hotel branding and image associated with an establishment or franchised hotel/motel name is important as a guarantee of facilities and service. But also significant is the extent of information available on the establishment on the internet as well as the increasing ability for guests to make a direct booking and payment over the internet (Altman, Kant & Rattanaruengyot, 2009). Over the five years through 2011, industry employment is expected to increase by an average 1.3% per annum to 4.0 million workers (Nelson, 2010). This stunted growth reflects the cutting of surplus employees during the recession and an increasing emphasis on labor productivity. In addition, industry operators have made greater use of casual employees to meet peak customer demand periods (Waterson & Rud, 2009).

Before mid-2008, industry operators achieved solid profit growth due to robust growth in hotel demand relative to supply and improving labor productivity, typically associated with more online and computerized technology for hotel bookings, reservations and staff training systems (Altman, Kant & Rattanaruengyot, 2009). However, profit has plummeted since mid-2008 as hotel demand has fallen, even though some variable costs have decreased (Meyercord, ...