In October 2023, luxury online tour operator Luxtripper entered administration, revealing a substantial financial deficit. The company was estimated to owe £11.9 million, with over £9.1 million due to customers.
The administrators’ report highlights critical factors leading to Luxtripper’s downfall, including financial mismanagement and unsustainable expansion during the pandemic.
Luxtripper’s Financial Obligations
The luxury online tour operator Luxtripper, which entered administration in October 2023, is estimated to have owed £11.9 million. This figure includes more than £9.1 million owed to customers.
Administrators from ReSolve Advisory, appointed on October 27, included this information in a recent Statement of Proposals. They noted that these liabilities might be adjusted should additional claims be received, and pointed out that the accounts have not been audited, casting some uncertainty on their accuracy.
Atol Renewal and Financial Decline
Despite the company’s deteriorating financial state, the Civil Aviation Authority (CAA) renewed Luxtripper’s Atol in September 2023. The administrators noted that by October, the company’s financial position had worsened to the extent that employee salaries could not be paid.
However, the accounts used for the Atol renewal showed a profit of almost £1.1 million for the fiscal year ending March 2023. This was largely due to a significant increase in intangible assets, which rose from £626,000 in 2021 to £3.6 million in 2023, masking what would have been a considerable loss for the year.
Impact on the Air Travel Trust Fund
The Air Travel Trust Fund is expected to cover up to £4 million of the £9.1 million owed to customers, as 60% of customer claims are anticipated to be directed to credit card companies. The exact scale of Luxtripper’s non-Atol business remains unclear.
Industry sources have suggested that the company might have been selling non-licensed packages. The administrators have indicated that they do not expect any distribution of funds to the 1,185 unsecured creditors, which include customers, suppliers, and shareholders.
Pandemic Expansion and Financial Strain
During the pandemic, Luxtripper expanded considerably, increasing its staff from around 50 to 155. The company also secured £1.2 million in ‘angel’ investment in 2020 and chose to continue trading despite not qualifying for a government Coronavirus Business Interruption Loan Scheme (CBILS) loan.
This aggressive expansion, coupled with pandemic-related losses, left the company in need of fresh capital by 2022. By April 2023, it was evident that the company was financially distressed. One industry insider remarked, ‘Financially, the business made mistake after mistake.’
Employee and Tax Liabilities
Luxtripper also faced substantial liabilities in terms of unpaid wages and taxes. The company owed approximately £277,000 in unpaid salaries and £400,000 in taxes to HMRC, further exacerbating its financial troubles.
An industry source indicated that the company’s decision to continue expanding during the pandemic, without adequate financial backing, contributed significantly to its eventual collapse.
Stakeholder Impact and Future Prospects
The administrators have warned that there is little to no prospect of funds being distributed to unsecured creditors, which is a significant blow to former employees, suppliers, and shareholders.
Former senior industry executives, who were among the creditors, may need to reconcile with the likelihood that they will see no financial recovery from their investments in the company. This situation highlights the precarious nature of the travel industry, particularly in challenging economic climates.
The failure of Luxtripper underscores the importance of financial prudence and strategic planning in the travel industry. The impact on customers, employees, and other stakeholders serves as a cautionary tale.
As the industry navigates the post-pandemic landscape, Luxtripper’s case illustrates the critical need for robust financial and operational strategies to ensure long-term viability.
