The UK Travel Agency Industry Research Paper

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Business Analytics and IntelligenceWord ReportNovemberIntroductionThis 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 IndustryTravel 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 IndustryAs 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 IndustryFigure 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 UK2008Daily Internet Users (%)Users Shopping online (%)2009495320105561201160622012646620136867201473722015767420167777201782772018867820198782Source: ONS, 2019, n.pag.Business Analytics and its Role in Decision-MakingBusiness 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 AnalyticsTable 2: Profit Margin Summary StatisticsProfit Margin 2019 Profit Margin 2021 Mean53.94Mean43.957Standard Error9.308684834Standard Error12.6630573Median58.685Median49.195Mode#N/AMode#N/AStandard Deviation29.4366461Standard Deviation40.0441032Sample Variance866.5161333Sample Variance1603.530201Kurtosis-1.718755008Kurtosis-1.019074298Skewness-0.15167862Skewness-0.48745873Range78.98Range116.63Minimum15.25Minimum-25.53Maximum94.23Maximum91.1Sum539.4Sum439.57Count10Count10Profit Margin 2019 Profit Margin 2021 Table 3: Turnover Summary StatisticsTurnover 2019 Turnover 2021 Mean10.282Mean6.187Standard Error3.403117133Standard Error1.865709904Median5.45Median5.165Mode#N/AMode#N/AStandard Deviation10.76160129Standard Deviation5.899892749Sample Variance115.8120622Sample Variance34.80873444Kurtosis2.830979359Kurtosis2.757588187Skewness1.649556105Skewness1.543094335Range35.15Range19.68Minimum0.52Minimum0.32Maximum35.67Maximum20Sum102.82Sum61.87Count10Count10Table 4: Current Ratio Summary StatisticsCurrent Ratio 2019 Current Ratio 2021 Mean1.745Mean2.276Standard Error0.408118311Standard Error0.693482676Median1.33Median1.785Mode#N/AMode#N/AStandard Deviation1.290583417Standard Deviation2.192984775Sample Variance1.665605556Sample Variance4.809182222Kurtosis0.779011988Kurtosis5.292140643Skewness1.457774086Skewness2.206138421Range3.53Range7.46Minimum0.59Minimum0.43Maximum4.12Maximum7.89Sum17.45Sum22.76Count10Count10Table 5: Return on Assets Summary StatisticsReturn on Assets ROA 2019 Return on Assets ROA 2021 Mean1.93Mean-3.677Standard Error1.34792433Standard Error2.819575638Median2.9Median-0.455Mode3Mode#N/AStandard Deviation4.262510997Standard Deviation8.916281051Sample Variance18.169Sample Variance79.50006778Kurtosis2.873563483Kurtosis-0.806055232Skewness-1.583406413Skewness-0.678956102Range14.7Range25.51Minimum-8Minimum-17.51Maximum6.7Maximum8Sum19.3Sum-36.77Count10Count10Table 6: Return on Capital Employed Summary StatisticsReturn on Capital Employed ROCE 2019 Return on Capital Employed ROCE 2021 Mean0.236958419Mean-0.111560336Standard Error0.064261936Standard Error0.215367694Median0.210988045Median0.011933834Mode#N/AMode#N/AStandard Deviation0.203214085Standard Deviation0.681052446Sample Variance0.041295964Sample Variance0.463832434Kurtosis0.363335925Kurtosis8.146667798Skewness0.350323793Skewness-2.746146328Range0.71483871Range2.367113402Minimum-0.093548387Minimum-1.98Maximum0.621290323Maximum0.387113402Sum2.369584189Sum-1.115603362Count10Count10The profit margin provides a measure of overall industry profitability, while the turnover measures the industry’s 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…

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…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 ResultsTable 8: Regression ResultsTable 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).ConclusionThe industry’s 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 t

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