Lowcost Holidays demise blamed on Brexit vote
15.7.2016 (BBC business)
Holiday booking company Lowcost Travelgroup has gone into administration, as uncertainty ahead of the EU referendum and the fall in the pound were blamed for its demise.
The group has 27,000 holiday makers in resorts and 110,000 more with bookings.
Administrators said Lowcost Travelgroup ceased trading on 15 July, with the loss of 120 jobs in the UK.
Smith & Williamson and CMB Partners were appointed administrators after the firm’s own rescue attempts failed.
Those “exhaustive” attempts had been “hampered by the recent and ongoing turbulent financial environment”.
Customers’ flight bookings will be valid in almost all cases, but hotels will need to be paid for, a company spokesperson said.
Smith & Williamson said intense competition had caused the collapse but also the increased terror threat and the uncertainty before and after the recent referendum.
“The group experienced significant market headwinds in the run up to the EU referendum as holidaymakers delayed decisions. This was compounded by the Leave vote itself and the subsequent fall in value of the pound,” said Finbarr O’Connell of Smith & Williamson.
“Regrettably, in these extraordinary conditions, the directors had no option but to place Lowcost Travelgroup Limited into administration. ”
The group operated a travel agency business from headquarters in the UK and offices in Spain, Switzerland and Poland.
The administrators said 60% of customers were British.
The group mainly sold hotel accommodation through its wholesale (Lowcostbeds) and retail (Lowcostholidays) businesses.
It also sold holidays to consumers in Europe and Scandinavia using technology that enabled customers to choose from a variety of flights and hotels for their chosen destination.
The failure will affect many customers who have purchased flights or holidays, some of whom are on holiday in resorts and some of whom have not travelled yet.
A statement said that all flights involving people currently in resorts have been paid for and hence customers will be able to fly home when their holidays are over.
It added that, “unfortunately, as regards customers who have not travelled as yet a small number will have problems as regards their flights not having been paid for and many will have problems as regards their hotel rooms not having been paid for”.
A spokesperson for the UK regulator, the Civil Aviation Authority (CAA) said: “We understand the Spanish travel company Lowcost Holidays has ceased trading. The company was based in Mallorca and was registered with the Balearic Islands authorities.
“The company was therefore not part of the UK’s Atol scheme and the Balearic Islands authorities are responsible for the holiday protection arrangements for the company’s customers.
“We believe the company may have had a large number of British customers and many of these are likely to be overseas.
“Our understanding is these customers should have valid flight tickets to use to return home to the UK. We advise customers to check the status of their bookings with their airline and accommodation provider.”
Lowcost Travelgroup employed 120 staff in Crawley, West Sussex who have been made redundant.
Most of the company’s 451 staff were based in Poland.
Analysis: Joe Lynam, BBC Business Correspondent
The mass holidays business and especially selling hotel beds all over the world is a tough one. The margins are negligible. Often – as appears to be the case with Lowcost Holidays – the cash earned for future holidays was used to pay for people that were already away.
So if there’s a relatively sudden dip in confidence leading up to the Brexit referendum and then the pound plunges against the euro after the vote, that can be enough to tip the financial house of cards that some holiday companies have erected.
Tighter EU rules mean that airlines have responsibility for their customers and must get them home. Also many credit card providers include free travel insurance cover.
But the longed for trip away will not now be happening for thousands of Lowcost Holidays customers.