In early May 2020 Beyond Band of Brothers Tours (BBBT) ceased operations, removed its social media presence and quit responding to inquiries. According to a local CBS46 news report from of Suwanee, GA dated May 4, 2020 the company has file for bankruptcy in Florida. [https://www.cbs46.com/news/thousands-of-people-out-thousands-of-dollars-after-beyond-band-of-brothers-files-for-bankruptcy/article_3b3489ba-8e45-11ea-92b9-03aa085cec07.html] The article lists approximately $12 million in liabilities, only $68,000 in cash, and lists almost 2,000 people on secured creditor list! At Knee Deep Into History we are NOT celebrating the demise of this large, well-known competitor; we are wondering how this bankruptcy will impact our future business. If one of the biggest military tour companies disappears, what is the financial condition of a small operator? Why should potential customers trust the industry—especially the small operators—once travel commences again?
In general terms, the tour industry represents a positive cash flow business model: Deposits and final payments are collected from customers in advance. As the tour approaches / gets underway, payments are made to the service providers—hotels, bus companies, restaurants, tour guides, etc.
However, this model can become “stressed” in the pursuit of profits—and it is impossible to see this from the outside. Do tour operators commit to a certain number of hotel rooms to ensure deep-discounted rates? Do they do the same with airline tickets? Once “business as usual” disappears, companies that pursue such profit-enhancing strategies aggressively can be crushed. Is this what happened at BBBT?
In hindsight, one “red flag” this author observed was the company’s very lenient payment policy on at least one tour: 10% 90 days prior to departure; 50% 60 days prior; and 40% 30 days prior. This was much more lenient than most other operators. As the world came crashing down, and Americans started cancelling tours, it is likely that BBBT had only collected a small percentage of its deposits to meet its liabilities.
AS A SMALL TOUR OPERATOR WE PAY VERY CLOSE ATTENTION TO THE TIMING OF CASH INFLOWS AND OUTFLOWS, BECAUSE WE CAN’T AFFORD TO SEE OUR REPUTATION GET RUINED. For example, we carefully negotiate cancellation dates with our suppliers that fall later than cancellation dates with our customers. Thus, if we need to cancel a trip because we have not achieved the minimum number of participants, we can exit our supplier contracts with little liability. We also do not pursue the aggressive business practices outlined above.
BUT… 2020 HAS TAUGHT US THAT EVEN CAREFUL MATCHING OF INFLOWS AND OUTLFOWS CAN’T GUARANTEE SATISFIED CUSTOMERS DURING A BLACK SWAN EVENT. For example, our Battle of the Bulge Tour (Scheduled for 14 – 20 July) refund policy was 75% in May, 50% in June and 25% after July 1. Again, this reflects the timing of some payments required to service providers. A horrible terrorist event in early July, just days before the tour, could see customers cancelling their tour—only to be entitled to a 25% refund under our contract. In this case, only a good trip cancellation insurance policy could protect the customer. That will be the topic of the next blog post…
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