Business Analytics and Intelligence
Word Report
November
Introduction
This 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 Industry
Travel 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 Industry
As 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 Industry
Figure 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 UK
2008
Daily Internet Users (%)
Users Shopping online (%)
2009
49
53
2010
55
61
2011
60
62
2012
64
66
2013
68
67
2014
73
72
2015
76
74
2016
77
77
2017
82
77
2018
86
78
2019
87
82
Source: ONS, 2019, n.pag.
Business Analytics and its Role in Decision-Making
Business 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 Analytics
Table 2: Profit Margin Summary Statistics
Profit Margin 2019
Profit Margin 2021
Mean
53.94
Mean
43.957
Standard Error
9.308684834
Standard Error
12.6630573
Median
58.685
Median
49.195
Mode
#N/A
Mode
#N/A
Standard Deviation
29.4366461
Standard Deviation
40.0441032
Sample Variance
866.5161333
Sample Variance
1603.530201
Kurtosis
-1.718755008
Kurtosis
-1.019074298
Skewness
-0.15167862
Skewness
-0.48745873
Range
78.98
Range
116.63
Minimum
15.25
Minimum
-25.53
Maximum
94.23
Maximum
91.1
Sum
539.4
Sum
439.57
Count
10
Count
10
Profit Margin 2019
Profit Margin 2021
Table 3: Turnover Summary Statistics
Turnover 2019
Turnover 2021
Mean
10.282
Mean
6.187
Standard Error
3.403117133
Standard Error
1.865709904
Median
5.45
Median
5.165
Mode
#N/A
Mode
#N/A
Standard Deviation
10.76160129
Standard Deviation
5.899892749
Sample Variance
115.8120622
Sample Variance
34.80873444
Kurtosis
2.830979359
Kurtosis
2.757588187
Skewness
1.649556105
Skewness
1.543094335
Range
35.15
Range
19.68
Minimum
0.52
Minimum
0.32
Maximum
35.67
Maximum
20
Sum
102.82
Sum
61.87
Count
10
Count
10
Table 4: Current Ratio Summary Statistics
Current Ratio 2019
Current Ratio 2021
Mean
1.745
Mean
2.276
Standard Error
0.408118311
Standard Error
0.693482676
Median
1.33
Median
1.785
Mode
#N/A
Mode
#N/A
Standard Deviation
1.290583417
Standard Deviation
2.192984775
Sample Variance
1.665605556
Sample Variance
4.809182222
Kurtosis
0.779011988
Kurtosis
5.292140643
Skewness
1.457774086
Skewness
2.206138421
Range
3.53
Range
7.46
Minimum
0.59
Minimum
0.43
Maximum
4.12
Maximum
7.89
Sum
17.45
Sum
22.76
Count
10
Count
10
Table 5: Return on Assets Summary Statistics
Return on Assets ROA 2019
Return on Assets ROA 2021
Mean
1.93
Mean
-3.677
Standard Error
1.34792433
Standard Error
2.819575638
Median
2.9
Median
-0.455
Mode
3
Mode
#N/A
Standard Deviation
4.262510997
Standard Deviation
8.916281051
Sample Variance
18.169
Sample Variance
79.50006778
Kurtosis
2.873563483
Kurtosis
-0.806055232
Skewness
-1.583406413
Skewness
-0.678956102
Range
14.7
Range
25.51
Minimum
-8
Minimum
-17.51
Maximum
6.7
Maximum
8
Sum
19.3
Sum
-36.77
Count
10
Count
10
Table 6: Return on Capital Employed Summary Statistics
Return on Capital Employed ROCE 2019
Return on Capital Employed ROCE 2021
Mean
0.236958419
Mean
-0.111560336
Standard Error
0.064261936
Standard Error
0.215367694
Median
0.210988045
Median
0.011933834
Mode
#N/A
Mode
#N/A
Standard Deviation
0.203214085
Standard Deviation
0.681052446
Sample Variance
0.041295964
Sample Variance
0.463832434
Kurtosis
0.363335925
Kurtosis
8.146667798
Skewness
0.350323793
Skewness
-2.746146328
Range
0.71483871
Range
2.36113402
Minimum
-0.093548387
Minimum
-1.98
Maximum
0.621290323
Maximum
0.387113402
Sum
2.369584189
Sum
-1.115603362
Count
10
Count
10
The profit margin provides a measure of overall industry profitability, while the turnover measures the industrys 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...
…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 Results
Table 8: Regression Results
Table 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).
Conclusion
The industrys 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 towards recovery if they…
References
Camm, J. D., Cochran, J., Fry, M. J., & Ohlmann, J. W. (2020). Business analytics (4th ed.). Cengage Australia.
Chicco, D., Warrens, M., & Jurman, G. (2021). The coefficient of determination R-Squared is more informative than SMAPE, MAE, MAPE, MSE, and RMSE. The Open Access Journal for Computer Science Research, 7(1), 2-24.
Dimitri, D., Zikovic, I., Blecich, A., (2018). Profitability determinants of hotel companies in selected Mediterranean countries. Economic Research, 29(1), 1977-93.
Statista (2022). Travel agencies in the United Kingdom – Statistics and facts. Statista. https://www.statista.com/topics/4103/travel-agencies-in-the-united-kingdom-uk/#topicOverview
Statista (2022b). Annual revenue of travel agency enterprises in the United Kingdom (UK) from 2008 to 2020 (in million GBP). Statista. https://www.statista.com/statistics/640298/travel-agency-annual-turnover-uk/
Office for National Statistics (ONS) (2019). How our internet activity has influenced the way we shop: October 2019. Author. https://www.ons.gov.uk/businessindustryandtrade/retailindustry/articles/howourinternetactivityhasinfluencedthewayweshop/october2019#more-people-shop-online-as-internet-use-has-increased
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