Viktor Kuzerin, General Director of the SODIS Travel Company, on why Russian travelers become hostages of travel agencies.
Last winter, an acquaintance called me. And he made an unexpected offer - to buy a large tour operator company on the vine. A well-known and respected brand, specialists in ski tours
- Annual turnover?
- 80 million euros.
- How much?
- One ruble.
- ????? I'm embarrassed to ask, how much should you?
- I don't know exactly, maybe six million, maybe eight … Euros, of course.
I know the owners of the company for a long time. Veterans of the Russian tourist industry. Business was excellent. Excellent reputation. Significant market share. And here it is. How could this happen? Why are they going broke?
To answer this rhetorical question, you will have to tell a little about the technology of tourist business. If you already know everything, or you get bored, then I advise you to go straight to Part 2. It's about corruption, of course. But not all are crooks! So let's talk about honest business first.
Part I. Honest Tour Operator Business
For the sake of clarity, let's say that you, the reader, want to open a travel company and send tourists abroad. First, you need to decide on the positioning, i.e. make a choice. Will your company be engaged in mass tourism or individual tourism? You should not mix these two crafts - they are very different technologies. But first things first.
So, mass tourism.
Here's what to do. Get a bank loan. Purchase charter flights and an appropriate number of hotel rooms for the entire season. Not enough money for the whole season? It doesn't matter, you can buy for a few weeks and then pay from the proceeds received. It is only necessary that the seats on the plane and in hotels are well filled. If there are fewer tourists than expected, losses are guaranteed. You will either have to carry empty seats for your own money, or reduce the prices for vouchers below the cost price. However, with good market conditions and accurate management, the scheme works. The company is growing and increasing its volumes from year to year. Unfortunately, it's not just your company that grows. There are not so many clients, and there are more and more tour operators. Every year more and more charter chains are launched, more and more blocks are bought out on regular flights. The crisis of capitalist overproduction, however. With all that it implies.
Individual tourism is a different matter.
Here the technology is different. First you need to ask the tourist what he actually wants. Agree on a price, take an advance payment, pay and provide all services stipulated by the contract, such as: flight, transfer, accommodation, meals, excursions, etc. Such an operator does not buy anything in bulk. Everything on order. Since many clients cannot be served in such a “manual” way, there is no need for massive charter flights. The overwhelming majority of air tickets are purchased for regular flights. All hotels are booked in the name of the customer and are paid on a separate invoice in his name.
This makes the services somewhat more expensive. But there are fewer risks for tourists. The hotel was paid for, the ticket was in my pocket. Less risk for the tour operator. There is no need to purchase "perishable goods" for future use - air tickets and hotel rooms. Consequently, there is no need to accurately calculate the volume of purchases. Competition exists, but it only holds back the growth of the company. Whoever works better, whose service and prices are more attractive, gradually increases its clientele. This is what SODIS has been doing for over 20 years. As far as I can tell, she is doing quite well. The less fortunate ones fall behind or even curtail their activities. But the sudden termination of the activities of such a company does not threaten. This simply did not happen, and it cannot be.
So, a “mass” type of tour operator risks immeasurably more. But with solid financial support, its turnover can grow to a noticeable size very quickly. Under favorable conditions, of course. Are the conditions favorable?
Tourism is not a highly profitable industry. Five percent of the turnover is considered a good profit. We are talking about "dirty profit" But there are also costs. Rent, salary, advertising. The economy of a company with high turnover and low profit is unstable. A small change in market conditions, and the profit disappears altogether. It's time to count your losses. Has the ruble changed? Has the kerosene rise in price? Demand reduction guaranteed. Have the politicians cheated? Have security officials been banned from leaving? Ten percent of potential customers are lost "until further notice." Is on-line sales developing? Again a minus. Let's remember that an ambitious operator has already bought transportation and hotels, and no one will return the money to him. Now he needs to save something. So there are "ridiculous", unreasonable prices, aimed at dividing the miserable remnants of the customer base and helping out at least some money. At the end of the season, it is necessary to pay off suppliers, return loans and interest on loans. The logical result is a minus in the company's annual balance sheet. Almost the majority of large mass tour operators are chronically unprofitable. This is a fact. By the way, feeling strong competition, some mass tour operators are trying to create with them departments or departments of individual or VIP tourism. This could provide a small but guaranteed profit. But working with a VIP clientele is not easy. This takes a long time to learn, and not everyone has enough patience.
So, the year has brought losses. What's in the future? This is where the business owner has options. It can be sadly stated that nothing but debts is expected in the future. Then it is necessary to carefully stop the sales, fulfill in a couple of months all the obligations already assumed, take out all clients to their homeland and close the "shop". This is how the owners of Assent Travel, St. Petersburg's Calypso and some others acted responsibly and honestly. Not a single client was hurt.
You can try to recoup next season. Looking for the best, take more loans and buy more seats. However, miracles do not happen. And the new season is likely to bring only new losses. The most unpleasant thing will happen if the air carrier refuses to service the company on debt, and the bank does not give new loans. Then "sudden death" will happen. The company will announce the termination of its activities from tomorrow, tourists will have to be taken out at the expense of "Tourist assistance", those who paid for the vouchers will line up in the insurance company. This is exactly what happened with "Neva", "Lanta-tour", "Labyrinth" and many others. Just as chronic heart disease responds to bad weather, chronically unprofitable companies did not survive the current year and "died" a little ahead of schedule. Referring to difficulties.
Let the reader generously forgive me for the calm, academic tone. In fact, I really want to call a spade a spade. Clients of mass operators are mostly poor people. For a resident of the polar Vorkuta, for his family and children, rest by the sea is a long-awaited and, frankly, necessary thing. He may have been saving money for a trip for a year, and this is such a bummer. There is no other money. There will be no holiday, there will be no sea for children, there will be no vitamins for them. What is the name of the person who arranged this? It's a pity that not all words can be used publicly.
So there is an opinion about crooks in the tourism industry. The shadow of mistrust falls on conscientious people. For example, new clients ask us to show that the hotel has already been paid for. We will show, of course. Under any circumstances, our managers are OBLIGED to check the reservation before arrival: the name of the customer, the dates, the number and type of rooms. But it is better to pay as late as possible. It is in the interests of the customer - suddenly he decides to cancel the tour. However, as the customer wishes, we will do so.
Part II. Crooks and thieves
The world is not without honest people. The only pity is that there are few absolutely honest people. More often they come across "conditionally honest". These are those whose principles depend on the amount. For a "conditionally honest" to steal a silver spoon from the table is immoral. A million can and should be appropriated. It so happens that scammers open a travel company, give seductive advertising, sell a “doll” to gullible buyers and disappear with the money. This happens, and not only in Russia. But this is a business of professional scammers, pure criminality! More elegant schemes of taking away or withdrawing money are used by the “conditionally honest”. First, you need to get a new loan from the same bank without paying off the loan. Then, without paying the airline for transportation, get new seats. After that, sell as many vouchers as possible. And it's done.
But how is this possible? If I owe a ruble, who will give me three on parole? And how to buy a dozen air tickets without money, on credit? A dozen, indeed, is impossible. And ten thousand is possible! You just need to agree with whom you need the correct size of the rollback. Yes Yes exactly. Part of the loan in the form of cash will go to the responsible employee of the bank, part - to the responsible employee of the carrier. Part of it will go towards the salary of the owner of the company. What will remain - for various little things. And the ship is sailing! And there is even revenue - after all, hotel rooms and tickets are sold to travel agents. Those, not expecting trouble, sell cheap vouchers to their customers. Shoppers gaze lovingly at vouchers, wait for vacations, and pack their bags. If they are lucky, they will have time to rest. But not everyone is lucky. Bankruptcy, and in this case it is safe to say - the deliberate bankruptcy of the company, is only a matter of time. And not everyone will receive compensation, because their money will be appropriated, referring to economic difficulties, by "conditionally honest" people.
This is how it is done. A few months before bankruptcy, the company's current assets begin to evaporate like dry ice in the hand of a magician. Money is flowing away under strange agreements or cashed out through "trash heaps". The compulsory insurance contract is concluded with an insolvent insurance company. As a result of various kinds of mergers and divisions, the property and funds of the bankrupt become inaccessible to either creditors or deceived tourists. Financial guarantees and insurance don't work. Have the eight thousand defrauded tourists received compensation from Capital Tour? No matter how it is! None of them got a dime! And the tourism combiners shy away from responsibility, found new companies and act as consultants and experts.
Is it some tour operators to blame? There is no oversight body in tourism as an industry. There is no one to stop the activity of a potential bankrupt. But the banking system has a regulator. It is called the Central Bank. Where did the experienced financiers look? And who released unpaid tickets to the operator breathing in incense? Is it difficult to ensure that no tickets are issued without payment or proper guarantees of payment? With this practice, the tour operator will not be inflated like a soap bubble, and tourists will not suffer. Only who needs it! It is easier to come up with another stupid law or load bona fide companies with "travel assistance".
Such a sad outcome.
