Though it’s still a crisp autumn season, winter has shown its first sign of setting in among the travel agencies. Guangda Communications Travel Agency (GUANGDA) in Dongguan City, Guangdong Province, recently closed without even a warning, making it a possible first domino. This year has been difficult for the touring industry with snow storms in January, earthquakes in May, and flood and cyclone in the recent months. World economy has also been harsh. Not long ago, reports were released saying that 1/10 of small and medium travel agencies collapsed, Dongguan being the primary stricken area.
Dongguan Tourism Bureau, the local governing body, said that it is normal for individual agencies to close up. “Strengthen your management and get ready for future challenge”, it said, is what the industry is supposed to do now. According to our sources, the income this year has plummeted at least 30%, some small agencies are running in the red now.
Large sum of debts
The reporter visited GUANGDA at the Wanjiang Shuttle Bus Station yesterday afternoon and found it empty, doors closed. A person passed by told us it has closed for almost a month now.
Two security guards stopped us when we tried to enter the office building. One of them told us that it was closed in mid-September since when numerous creditors have come frequently. “No one is permitted to go up. They still owe us the rent.” he said.
An anonymous source informed us that GUANGDA used to blow about its relations to the communications bureau and Communications Group. Now its bosses have left with a large sum of debts. One staff said that the agency is closed because the owners had a conflict.
No danger of chain effect for now
There were also reports claimed that 1/10 of travel agencies collapsed due to the natural disasters and economy turndown. Dongguan is said to be the most stricken city. Will the GUANGDA close-up trigger a domino then?
Chen Zijiang, Vice President of China Travel Agency Dongguan Branch, said it won’t happen and the reports have been “exaggerated”. As agencies in Dongguan mainly do bundle tours, they are different from Guangzhou and Shenzhen agencies that live upon individual travellers. “They can manage to exist by a few bundles.” A couple of regular customers will keep them alive.
Gross profit down to 3%
However, the GUANGDA collapse is still “not surprising” to our respondents. Wu Qingyuan commented, “Such small collapse can also make it to the news considering the present situation?” As vice president of Dongguan Jinlu, he said tourism industry is having a bad time with all the natural disasters and the economy crisis. The Olympics also affected as thousands of people stayed at home watching the games.
Wang Tairu, President of Dongguan Kaixin Travel Agency lamented, “It’s very hard to find large bundle groups now.” As the macro-economy tightens, companies are frugal in travelling expenses. According to him, individual travelers are also cutting traveling plans and saving up. “International tour groups are turning to domestic travel; domestic to provincial; and provincial to nothing”, he said. High-end groups are rarer this year, and low-end groups earn little but eyeballs.
Wu Xiaoqiang takes a more pessimistic view on the future. He said the average gross profit of the travel industry has dropped to 3% this year and 8% is a very beautiful performance. Just 8 years ago, when the industry was in its full bloom, that figure was around 20%.
Possible reshuffle in the industry
The Dongguan Tourism Bureau expressed confidence in the industry though. Yu Jianmin, the deputy Administrator of the bureau said, “It’s not just Dongguan. Agencies in all other areas are facing the same situation. An individual bankruptcy is only the result of natural selection.”
Though not as bad as the rumor goes, the slide in traveling industry is obvious. A senior expert pointed out that the drawdown could be at least 30%. He also said that some small agencies are running in deficit and more severely, more agencies will close up next year if the situation deteriorates. A reshuffle in the industry will happen then.
Chen Zijiang commented that the rapid but uncontrolled grow in travelling industry has brought about cut-throat competition and market disruption behaviors. “It may be good if a reshuffle happens and those bad-behaved agencies go bankruptcy”, he said.
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