Impact of Inflation on Tourism Companies: A Case Study of Virgin Holidays

This presentation analyzes the impact of inflation on tourism companies, with a case study of Virgin Holidays. It covers the causes of inflation, its impacts on the company's operations and performance, and inflation management strategies deployed by the company.

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Introduction
Tourism has been affected with inflation in
significant manner. Inflation puts a
significant impact on the overall operations
of tourism business organizations. In tourism
destination areas, inflation is also caused by
land values as tourism generates additional
demand for land. The main aim of present
study is to analyze the impact of inflation on
tourism companies along with the ways they
overcome from those challenges.
Key operations and markets
Conclusion
From the above-mentioned
information, it can be summarized that
inflation is also caused by land values
as tourism generates additional demand
for land. Further the increase in price is
compensated by customers by
increasing the charges significantly.
High amount of inflation put a
significant impact on demand of
tourism and also affect tourism sector
Inflation management
strategies deployed
Understand the situation: To
manage the inflation, it is
important to understand the
entire situation thoroughly as it
helps in preparing suitable
strategies for further
betterment. Understand
finances: Here, it is imperative
to analyze own financial
structure. For this purpose, it is
important to structure equity,
preferred stocks and more.
Prepare for employee
retention and
communication: Employees
are crucial element as it is
required to keep their morale at
higher level by maintaining
proper communication with
them so that they stay within
entity for longer duration.
Company background and overview
Virgin Holidays is one of the largest tour operators
based on UK. They are arranging Holidays since 1985
and considered as one the market leaders, tour operator
to USA and Caribbean. It was founded by Richard
Branson to offer effective travel experiences to the
people. Additionally, Virgin Aireline aims to offer
equal services to all regardless of cabin class selected
by passengers. It is classified in different parts like
Virgin Atlantic Airways, Virgin Voyages and Virgin
Hotels to offer best possible travel experiences to
visitors.
The main operation of Virgin
Holidays is to offer tour packages to
customers wherein they cover
holiday to villas attraction ticket, car
hire, multi destination holidays and
more for large groups and more. It is
analyzed that Virgin Holidays is
considered as the first and foremost
choice of customers while they
planning their Holidays. The
company emphasis on providing
better & effective customer
experiences and increases their
engagement through holiday
campaigns.
References
Naidu, S., Chand, A. and Pandaram, A., 2017. Exploring the nexus between urbanisation, inflation and tourism
output: empirical evidences from the Fiji Islands. Asia Pacific journal of tourism research, 22(10), pp.1021-1037.
•Dimopoulos, D., Queiros, D. and Van Zyl, C., 2019. Sinking deeper: The most significant risks impacting the dive
tourism industry in the East African Marine Ecoregion. Ocean & Coastal Management, 181, p.104897.
•Icoz, O. and Icoz, O., 2019. Economic impacts of tourism. In The Routledge Handbook of Tourism Impacts (pp. 95-
108). Routledge.
•Online
•Number of customers served by Virgin Holidays in the United Kingdom (UK) from 2015 to 2020. [Online].
Avaliable through :< https://www.statista.com/statistics/665239/virgin-holidays-inclusive-tour-passengers-uk//>
•Profit before tax of Virgin Holidays in the United Kingdom (UK) from 2012 to 2020. [Online]. Avaliable through :<
https://www.statista.com/statistics/873127/virgin-holidays-gross-profits/>
•Inflation coming faster than we can bail the water out’: Virgin boss, 2022. [Online]. Avaliable through :<
https://www.afr.com/companies/transport/virgin-falls-to-386-7m-loss-assures-rebound-is-underway-20220914-p5bhw
u/
>
Inflation is about increasing in the price
of a product during a certain period of
time. Inflation is a broad term that
increases overall prices along with cost
of living within the country. During
inflation, rates of products and services
get high which create burden on receiver
and provider both. It also affects the
overall revenue and profitability of the
organization.
The main causes of Inflation are increase
money supply, devaluation, policy
regulations, rising wages and more.
Inflationary periods and main
causes
Impacts of inflations on company’s operations and
performance
The company faced deep loss of nearly 386.7 million USD
during 2022 financial year. The loss was five times more
than the loss, they face through 2021 period. In this
situation, the airlines started to cut down the cost to deal
with the economic pressure. As a result, they fire numerous
employees and also raise the price of tickets to match the
level of inflation in significant manner.. As per chief of
Virgin Airlines, they are looking forward to cut down the
cost and also warned passengers that prices of airline might
increase in near future. In this way, inflation affected
operations and performance of the entity significantly that
will also cause harm to their performance in future period
of time (Inflation coming faster than we can bail the water
out’: Virgin boss, 2022).

Company Background and
Overview
Virgin Holidays is one of the largest tour operators based on UK. They are arranging Holidays since 1985 and
considered as one the market leaders, tour operator to USA and Caribbean. It was founded by Richard Branson to
offer effective travel experiences to the people. Further, they offer Holidays to different locations like Canada,
South Africa, Middel East, Indian Ocean and more. They focus on creating such memories for customers which
remain with them for longer period of time. In this regard, their packages cover holidays to villas, car hire, multi-
destination holidays and holidays for large groups. For this purpose, they are likely to closely work with the best
hotel partners across the world. Additionally, Virgin Aireline aims to offer equal services to all regardless of cabin
class selected by passengers. It is classified in different parts like Virgin Atlantic Airways, Virgin Voyages and
Virgin Hotels to offer best possible travel experiences to visitors.

Key Operations and Market
The main operation of Virgin Holidays is to offer tour packages to customers wherein they cover holiday
to villas attraction ticket, car hire, multi destination holidays and more for large groups and more. With an
aim to provide the best hotel facilities while travelling, they closely associated with numerous hotel
partners all across the world. They ensure to feel people like home when they are away from their homes.
In 1984, Richard Branson started high quality Airlines that is also value for money.
It is analyzed that Virgin Holidays is considered as the first and foremost choice of customers while they
planning their Holidays. The company emphasis on providing better & effective customer experiences and
increases their engagement through holiday campaigns. They launched a new campaign to refresh the
brand names as Seized The Holidays in September 2016. Here, company engaged customers by using
numerous channels such as Television and more.

Inflationary period and main
causes
Inflation is about increasing in the price of a product during a certain period of time. Inflation is a broad term
that increases overall prices along with cost of living within the country. During inflation, rates of products and
services get high which create burden on receiver and provider both. It also affects the overall revenue and
profitability of the organization. The main causes of Inflation are increase money supply, devaluation, policy
regulations, rising wages and more. When supply of money increased in the market in terms of cash, coins and
more, it further creates inflation in market place. Additionally, devaluation makes the country’s exports less
expensive and encourage foreign nations to buy more and more devalues goods. Due to this, foreign products
for devaluing country becomes expensive that stimulates citizens of devaluing nation to buy domestic products
over foreign imports. Sometimes, policies and regulations also caused increase in the overall price that further
creates inflation in market. In case of Virgin Holidays, they are also facing issues related to inflation that might
affect future operations of the entity profoundly.

Impacts of Inflation on company’s
operation and performance
The company faced deep loss of nearly 386.7 million USD during 2022 financial year. The
loss was five times more than the loss, they face through 2021 period. In this situation, the
airlines started to cut down the cost to deal with the economic pressure. As a result, they fire
numerous employees and also raise the price of tickets to match the level of inflation in
significant manner. As per chief of Virgin Airlines, they are looking forward to cut down the
cost and also warned passengers that prices of airline might increase in near future. In this
way, inflation affected operations and performance of the entity significantly that will also
cause harm to their performance in future period of time (Inflation coming faster than we can
bail the water out’: Virgin boss, 2022).

Inflation management strategies
deployed
To manage the inflation, there is requirement to adopt certain effective strategies so that the company can easily manage its performance
during tough time. In this regard, inflation management strategies followed by Virgin Holidays are mentioned below:
Understand the situation: To manage the inflation, it is important to understand the entire situation thoroughly as it helps in preparing
suitable strategies for further betterment. In case of Virgin Holidays, they need to understand the situation and issues caused by COVID-
19 to tackle the inflation appropriately.
Understand finances: Here, it is imperative to analyze own financial structure. For this purpose, it is important to structure equity,
preferred stocks and more. For this purpose, there is requirement to do appropriate financial planning as higher rate of interest might
change the numbers within business plan. In this regard, Virgin Holidays is required to understand financial conditions in better way to
take appropriate decisions in future period of time.
Prepare for employee retention and communication: Employees are crucial element as it is required to keep their morale at higher
level by maintaining proper communication with them so that they stay within entity for longer duration. In this regard, Virgin Holidays
need to maintain proper communication with their workforce by following appropriate mediums as it will help in retaining workers in
future.

Conclusion
From the above-mentioned information, it can be summarized that inflation is also caused by land
values as tourism generates additional demand for land. Further the increase in price is compensated
by customers by increasing the charges significantly. High amount of inflation put a significant
impact on demand of tourism and also affect tourism sector in developing industry. In addition to
this, international tourism is likely to facilitate internal and external changes within the industry. The
above report is based on Virgin Holidays which is a well-known company for preparing effective
Holiday packages for passengers. It is found that the entity is facing great inflation that will create
issues in terms of managing pre-defined level of revenue & profit. There so discussion regarding
certain effective strategies that can be used by the company to deal with inflation significantly.