Business Analytics in the UK Travel Agency Industry

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 of 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 operate. Independents and miniples are travel agencies with few branches that mostly operate within a certain niche market, region, or town, while multiples operate a large number of outlets across 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 (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

Recent trends, however, point to a recovery in revenues (IBIS World, 2022). The projected growth is attributable to the rise of online travel agencies, which increased by over 700 businesses in 2021 (Statista, 2022). Revenues from online travel agencies are expected to grow significantly alongside the increasing 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

The table below presents data from the Office for National Statistics (ONS, 2019) on daily internet usage and online shopping rates in the UK from 2009 to 2019.

Source: ONS, 2019.

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 forecast future performance (Camm et al., 2020). Finally, prescriptive analytics is the course of action that follows from predictive analytics. Since business analytics is based on data, it provides a more accurate means to quantify risk, weigh decision alternatives, and make forecasts for planning (Camm et al., 2020).

Descriptive Analytics

Table 2: Profit Margin Summary Statistics

Table 3: Turnover Summary Statistics

Table 4: Current Ratio Summary Statistics

Table 5: Return on Assets Summary Statistics

Table 6: Return on Capital Employed Summary Statistics

The profit margin provides a measure of overall industry profitability, while turnover measures the industry's total sales revenues. The current ratio is an indicator of liquidity — that is, companies' ability to settle short-term obligations — and is beneficial for measuring how well the industry is recovering from the effects of the pandemic. Both ROCE and ROA are measures of operational efficiency in the industry.

All five variables yield a low standard deviation relative to the mean, pointing to a relatively normal distribution (Camm et al., 2020). Only profit margin and ROA yield negative skewness values, while the remaining variables yield positive skewness. The positive skewness implies that the industry is still attractive to investors, as it is likely to produce large gains. All variables except profit margin have positive kurtosis, indicating that the distribution is peaked and thick-tailed and that the level of risk is relatively low.

Conclusion

The industry's profitability, turnover, liquidity, and efficiency (as measured by ROA and ROCE) fell significantly as a result of the Covid-19 pandemic. However, the positive skewness and kurtosis values imply that the industry still has prospects for realizing gains. To increase profitability in the post-pandemic period, travel agencies could focus on improving their return on capital employed, as this yields a positive, statistically significant correlation with profit margin. Evidently, companies are unlikely to make substantial progress towards recovery by focusing on any single strategy, given that no single variable exerts a dominant effect on profitability.