Companies come and go. Some flourish and expand. Some tick over, unremarkably. Others fizzle and flounder. Such is the nature of business. Not everyone succeeds.
But at what point do you call it a day? When is there no way back? When do you owe it to your suppliers and industry partners to pull the plug?
Si Holidays was one such venture that withered on the vine. In early March, after weeks of uncertainty, it ceased trading and was placed into voluntary administration.
The writing had been on the wall weeks earlier when the operation put up the ‘for sale’ sign after confessing the travel wholesale market was proving to be a “very challenging environment”.
It was a sentiment no doubt shared by plenty of wholesalers who have struggled to maintain their relevance in a splintered and disorderly market.
Consolidation, Si Holidays said, was the logical step forward. But a deal did not materialise. The rest is history.
We now learn that Si Holidays owed $5.5m at the time it closed its doors, including nearly $1m in staff salaries and entitlements and $900,000 to Australian travel agents.
Should owner Tui Eruera have called time earlier and prevented the accumulation of such debts? After all, the business had been losing money ever since Eruera acquired it from Pinpoint Travel Group in October 2016.
Until administrator Dem Asia Group delves deeper into the finances of Si Holidays it is impossible to say with any authority, or clarity, and I am not for a moment suggesting Si Holidays traded while insolvent.
But it does raise the question of whether companies, and individual directors, push the boundaries too far in the struggle to stay afloat. In many cases, they undoubtedly do, with little regard to the financial damage their continued trading inflicts on others.
Whether it’s desperation, panic or sheer blind hope that keeps firms trading, it’s no excuse for the trail of financial chaos they leave behind.
In Si Holidays case, the temptation to keep trading even as the cash wells ran dry would have been particularly overwhelming. Its transition from a high volume, low margin business to low volume, high margin appeared to have been making progress as gross margins had climbed from 7.5% to 10.5%.
But it was too little, too late.
Some agents turned to social media channels to express their anger. That is to be expected. Retailers are often at the sharp end — blamed in other words — when travel plans go awry, so the frustration was inevitable and understandable. Their reputations are also on the line and, through no fault of their own, consumer trust would have been dented.
If there is one positive to emerge from this mess, it’s that it may provide the wake-up call for more agents to join AFTA’s Insolvency Chargeback Scheme. According to the liquidator, only a few retailers stung by the collapse of Si Holidays were part of the program which was heralded at its launch last year as the “missing link in the travel industry reform agenda”.
I suspect a few more will be signing up soon.
