Business Analytics and Intelligence

Word Report

November

Introduction

This report analyses the travel agency industry in the UK using descriptive and predictive analytics to predict future prospects. Data from Statista shows that there were 4,640 travel agencies in the UK as at September 2022 (Statista, 2022). This analysis covers 10 of these agencies, and uses six variables to guide predictions.

Background of the UK Travel Agency Industry

Travel agencies engage in selling tourism and travel products and services on behalf of cruise lines, airlines, accommodation companies, and other travel suppliers (Statista, 2022b). Travel agencies are categorized based on the number of retail outlets they run. Independents and miniples are travel agencies with few branches that mostly operate in a certain niche market, region or town, while multiples operate a large number of outlets in multiple towns (Statista, 2022b).

Visualization of the Whole Industry

As figure 1 shows, the number of businesses in the UK travel industry grew by 20 percent between 2012 and 2021 (Statista, 2022). In terms of revenues, the industry grew by 13.3 percent between 2012 and 2019, with annual revenues ranging between 21.9 billion and 32.5 billion GBP (Statista, 2022b). Industry revenues fell to 7.6 billion in 2020 and have remained below pre-pandemic levels (Statista, 2022).

Figure 1: Number of Businesses in the UK Travel Agency Industry

Figure 2: Revenue Trends in the UK Travel Agency Industry

(Figure 1: Industry Revenues in the UK Travel Agency Industry 2008 to 2020 (Statista, 2022))

Recent trends, however, point to a growth in revenues (IBIS Report, 2022). The projected growth is attributable to the growth in online travel agencies, which increased by over 700 businesses in 2021 (Statista, 2022). Revenues from online travel agencies are expected to grow significantly with the increase in the number of customers who prefer to shop online as shown in table 1 below:

Table 1: Percentage Daily Internet Usage Rates and Users Shopping Online in the UK

2008

Daily Internet Users (%)

Users Shopping online (%)

2009

49

53

2010

55

61

2011

60

62

2012

64

66

2013

68

67

2014

73

72

2015

76

74

2016

77

77

2017

82

77

2018

86

78

2019

87

82

Source: ONS, 2019, n.pag.

Business Analytics and its Role in Decision-Making

Business analytics is the process of visualizing and extracting useful insights from data to inform business decision-making (Camm et al., 2020). Descriptive analytics involves using historical data to obtain insights on past trends (Camm et al., 2020). Predictive analytics is the use of past data to create models that can then be used to predict future performance (Camm et al., 2020). Finally, prescriptive analytics is the course of action that follows predictive analytics. Since business analytics is based on data, it provides a more accurate way to quantify risk, weigh decision alternatives, and make forecasts for planning (Camm et al., 2020).

Descriptive Analytics

Table 2: Profit Margin Summary Statistics

Profit Margin 2019

Profit Margin 2021

Mean

53.94

Mean

43.957

Standard Error

9.308684834

Standard Error

12.6630573

Median

58.685

Median

49.195

Mode

#N/A

Mode

#N/A

Standard Deviation

29.4366461

Standard Deviation

40.0441032

Sample Variance

866.5161333

Sample Variance

1603.530201

Kurtosis

-1.718755008

Kurtosis

-1.019074298

Skewness

-0.15167862

Skewness

-0.48745873

Range

78.98

Range

116.63

Minimum

15.25

Minimum

-25.53

Maximum

94.23

Maximum

91.1

Sum

539.4

Sum

439.57

Count

10

Count

10

Profit Margin 2019

Profit Margin 2021

Table 3: Turnover Summary Statistics

Turnover 2019

Turnover 2021

Mean

10.282

Mean

6.187

Standard Error

3.403117133

Standard Error

1.865709904

Median

5.45

Median

5.165

Mode

#N/A

Mode

#N/A

Standard Deviation

10.76160129

Standard Deviation

5.899892749

Sample Variance

115.8120622

Sample Variance

34.80873444

Kurtosis

2.830979359

Kurtosis

2.757588187

Skewness

1.649556105

Skewness

1.543094335

Range

35.15

Range

19.68

Minimum

0.52

Minimum

0.32

Maximum

35.67

Maximum

20

Sum

102.82

Sum

61.87

Count

10

Count

10

Table 4: Current Ratio Summary Statistics

Current Ratio 2019

Current Ratio 2021

Mean

1.745

Mean

2.276

Standard Error

0.408118311

Standard Error

0.693482676

Median

1.33

Median

1.785

Mode

#N/A

Mode

#N/A

Standard Deviation

1.290583417

Standard Deviation

2.192984775

Sample Variance

1.665605556

Sample Variance

4.809182222

Kurtosis

0.779011988

Kurtosis

5.292140643

Skewness

1.457774086

Skewness

2.206138421

Range

3.53

Range

7.46

Minimum

0.59

Minimum

0.43

Maximum

4.12

Maximum

7.89

Sum

17.45

Sum

22.76

Count

10

Count

10

Table 5: Return on Assets Summary Statistics

Return on Assets ROA 2019

Return on Assets ROA 2021

Mean

1.93

Mean

-3.677

Standard Error

1.34792433

Standard Error

2.819575638

Median

2.9

Median

-0.455

Mode

3

Mode

#N/A

Standard Deviation

4.262510997

Standard Deviation

8.916281051

Sample Variance

18.169

Sample Variance

79.50006778

Kurtosis

2.873563483

Kurtosis

-0.806055232

Skewness

-1.583406413

Skewness

-0.678956102

Range

14.7

Range

25.51

Minimum

-8

Minimum

-17.51

Maximum

6.7

Maximum

8

Sum

19.3

Sum

-36.77

Count

10

Count

10

Table 6: Return on Capital Employed Summary Statistics

Return on Capital Employed ROCE 2019

Return on Capital Employed ROCE 2021

Mean

0.236958419

Mean

-0.111560336

Standard Error

0.064261936

Standard Error

0.215367694

Median

0.210988045

Median

0.011933834

Mode

#N/A

Mode

#N/A

Standard Deviation

0.203214085

Standard Deviation

0.681052446

Sample Variance

0.041295964

Sample Variance

0.463832434

Kurtosis

0.363335925

Kurtosis

8.146667798

Skewness

0.350323793

Skewness

-2.746146328

Range

0.71483871

Range

2.36113402

Minimum

-0.093548387

Minimum

-1.98

Maximum

0.621290323

Maximum

0.387113402

Sum

2.369584189

Sum

-1.115603362

Count

10

Count

10

The profit margin provides a measure of overall industry profitability, while the turnover measures the industrys total sales revenues. The current ratio is an indicator of liquidity or companies ability to settle short-term goals and would be beneficial in measuring how well the industry is...…at the P=0.05 significance level, making ROCE the only variable that significantly influences profit margin in the travel agency industry (r = 0.659, p = 0.05, 2 tailed.

Regression Results

Table 8: Regression Results

Table 8 above presents the results of the regression between profit margin, turnover, current ratio, ROA, and ROCE. The resultant regression equation is y (profit margin) = 0.89*Turnover + 0.65*Current Ratio + 0.68*ROA + 31.1*ROCE). However, none of the variables gives a p-value equal to or less than 0.05, implying that the relationship between the variables is weak. The intercept value of 42.87 shows that if all the variables ae equal to 0, the industry profit margin will be equal to 42.87. This would be due to the effect of other variables not included in the model. The R square value of 0.47 implies that only 47 percent of changes in profit margin are due to the four variables, while 33 percent are attributable to factors not included in the model (Chicco, 2021). Possible factors that would influence profitability could include the number of employees, the employees skill level, use of technology, and changing customer preferences, such as the growing popularity of online shopping over in-store shopping (Dimitric, 2019).

Conclusion

The industrys profitability, turnover, liquidity, and efficiency (as measured by ROA and ROCE) fell significantly as a result of the Covid19 pandemic. However, the positive skewness and kurtosis values imply that the industry still has chances of realizing gains. To increase their profitability in the post-pandemic period, travel agencies could focus on improving their return on capital employed as this yields a positive, significant correlation relationship with profit margin. Evidently, companies are likely to make little progress towards recovery if they…