Impact of Inflation on Hays Travels: Strategies to Control Inflation

This report discusses the impact of inflation on Hays Travels, including negative and positive impacts, and strategies to control inflation. It provides an overview of the company and their products/services, identifies the period and causes of inflation that the company experienced in the past, and discusses theories and models to decrease negative impact of inflation and to increase its positive impact. The report concludes with various strategies that are applied by various governments to control or reduce the negative impacts of inflation.

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Table of Content.
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Provide an overview of the company and their product/service..................................................1
Identify the period and causes of inflation that the company experienced in the past................1
CONCLUSION................................................................................................................................2
REFERENCES................................................................................................................................3

INTRODUCTION
Tourism is related to guiding of tourists and travellers across different parts of he country
or a city to where a traveller or tourist is intended to visit or explore. Tourism services includes
hotel and restaurants products and services, guiding of tourists etc. Inflation is an economic term
that is used for the rise in prices of goods and services that a customer needs to pay to the seller
in order to acquire that product or to enjoy respective service (Rubio, 2019). For better
understanding of this report, a firm Hays travels is taken under consideration which is a travel
agent chain based in UK headquarter in Sunderland, England. This report will be a brief
discussion that will be made on respective company, causes of inflation in the company along
with the theories and models to decrease negative impact of inflation and to increase its positive
impact.
MAIN BODY
Provide an overview of the company and their product/service.
Hays travels in a independent travel agent chain in UK with its headquarters in
Sunderland in England which has the largest number of travels agent stores in united kingdom. It
was founded by John Hays in 1980 and started its journey b y opening a small shop behind a
clothing store that was owned by John Hays's mother in Seaham, Durham. The firm is operating
from more than 40 years and has approximately 450 branches across the world and was
recognised as largest independent travel agent chain with more than 3500 employees working
across the globe. Hays travels was listed among top hundred employment provider in United
Kingdom after the hiring of 1500 employees after they purchased Thomas Cook Group with
2330 employees working in the organisation. Hays travels shown the total annual revenue of
more than 1 billion euros and its turnover increased by 42 million euros in 2017.
Identify the period and causes of inflation that the company experienced in the past.
Inflation is a term that is concerned with the the rise in the prices of the goods and
services that are being produced in an economy (Coibion and et. al.,2020). It considers the
general rise in the prices of goods and services that are produced in an economy which the
ultimate consumer needs to pay in order to consume the respective product. It also includes the
rate at which the prices rise in the economy.
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1. Demand pull inflation:- It is the inflation in which happens when the demand of the
goods is higher than the ability, capability, budget or willingness of a consumer to spend
certain amount on the goods that are being produced in an economy (Machlup, 2020). In
order to meet the demands of economy, the producers have to decrease the prices of the
commodity is not suited to the economy.
2. Cost Push Inflation:- It is a cause of inflation in which the prices of the goods to the
ultimate customer rises when the cost of inputs or raw material and wages charges
increases due to increase in the economy prices (Jain, Sharma and Kumar., 2022) . There
are various inputs which a business organisation uses in their production in order to
produce the final product for the customers. If prices of these inputs rises, ultimate prices
of respective product rises which directly leads to inflation.
3. Devaluation:- It is caused by the decrease in the value of currency of the nation or
decrease in the foreign exchange rate of a currency. It generally affects the global
enterprises that deals in international market as the decrease in the currency value of their
respective nation means the more prices they need to pay in order to exchange their
currency.
4. Increased money supply:- This cause of inflation is referred to as the increase in the
money circulation in an economy which means, more money in the hands of buyers,
increased number of coins, more bank accounts with the individual. This ultimately leads
to increased capacity of consumers to spend money on a particular product leading to
increased prices in the goods and services.
Negative impact of inflation on companies performance
Rise in inflation eventually affects every sector of the economy as well as business
organisation as it is directly connected to the prices of goods and services that re being provided
in an economy. The main and the most common issue or negative impact of inflation is that it
directly leads to the higher costs of production as the firms has to pay more prices for cost of raw
material, more wages cost etc. In order to run a business in the state of constant profitability,
inflation is a major barrier in their way as so keep constant profit, they will eventually need to
increase the prices of the goods to the ultimate customer in order to keep their earning stable. In
reference to Hays Travels which is a firm dealing in hospitality industry, inflation affects this
industry in a high rate as the tourists are intended to explore more about the nation or the place
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they had visited in least expenses but in the condition of inflation this is blocked as the travellers
needs to pay more to Hays travels in order to keep their buyers of their services satisfied they
will need to keep the prices low but in inflation is a major barrier as the tourists are not willing to
pay higher prices of the services on the other hand the organisation is bound to charge higher
prices as they will need to pay fairly to their employees. In order to provide lower prices, if the
firm decreases the salaries of their employees, then it will lead to dissatisfaction in their services
and jobs and will also decrease the employees loyalty. A tourist generally has a fixed budget they
are willing to spend on their visit but if the prices rises and if the prices rises, they will become
more conscious about their spendings.
Positive impacts of inflation
Inflation has its own negative impacts but on the other hand, it also carries its own
advantages for the organisations and producers as in the times of inflation they can enhance their
profitability by selling their goods and services at higher prices as the consumers are willing to
buy necessary products at higher prices as these products are necessary. Also the sales can be
enhanced and increased while in inflation due to the needs and wants of the buyers. On the other
hand the companies can invest more in same sector or set up an another organisation that meets
the demands of people. The right investment of company professionals will enhance greater
return on investments for organisation's investors. In reference with Hays travels, the firm should
keep their focus on providing quality and worthy products to their customers as this will keep
their constant profitability as travellers generally seeks for products and services that proves their
worth.
Strategies to control inflation
There are various strategies that are applied by various governments to control or reduce
the negative impacts of inflation which are:-
 Price Control:- Price control is a method in which government sets up price caps by
setting minimum or maximum prices of some of the necessary products in order control
inflation, government sets up maximum prices that are needed to be paid for a product so
as to control money supply.
 Contractionary Monetary Policy:- It is the policy build up by central governments in
which interest rates are increased or decreased to control supply of money in
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economy(Nelson, Pinter and Theodoridis, 2018). In conditions of inflation, interest rates
are increased.
 Open market operations:- Open market operations is a strategy adopted by central
government in which they buy or sell the federal reserves from or to market in order to
acquire or offer cash to them (Rocheteau, Wright and Xiao., 2018). In cases of inflation,
central government sell federal reserves to acquire cash.
 Reserve requirements:- Reserve requirements or reserve ratios are the the ratios in which
commercial bank retains the amount deposited by general public to them. A fixed
proportion of amount is deposited to the central bank as a security in order to ensure
solvency of the commercial bank. Central banks increases the proportion which a bank
needs to deposit as a security to central bank in cases of inflation so as to control the
supply of money.
CONCLUSION
From the above report, this can be concluded that inflation in an economy highly affects
the hospitality industry and a nation's position. There are various aspects in which inflation
affects a firm's position in a negative way. On the other hands inflation has its own benefits for
the producers and organisations if managed appropriately. Furthermore in this report, various
strategies were also discussed in this report that are adopted by central government by which
inflation can be controlled.
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REFERENCES
Coibion, and et. al., 2020. Inflation expectations as a policy tool?. Journal of International
Economics, 124, p.103297.
Jain, M.P., Sharma, A. and Kumar, M., 2022. Recapitulation of Demand-Pull Inflation & Cost-
Push Inflation in An Economy. Journal of Positive School Psychology, pp.2980-2983.
Machlup, F., 2020. Another View of Cost-Push and Demand-Pull Inflation. In Economic
Semantics (pp. 241-268). Routledge.
Nelson, B., Pinter, G. and Theodoridis, K., 2018. Do contractionary monetary policy shocks
expand shadow banking?. Journal of Applied Econometrics, 33(2), pp.198-211.
Rocheteau, G., Wright, R. and Xiao, S.X., 2018. Open market operations. Journal of Monetary
Economics, 98, pp.114-128.
Rubio, J., 2019. Higgs inflation. Frontiers in Astronomy and Space Sciences, 5, p.50.
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