Lessons from the Holidays 4U collapse

So, more than 60,000 holidaymakers lost their holidays on Wednesday when Holidays 4 UK collapsed.

At the same time as this single-destinational-budge- tour operator collapses we see that Cox & Kings are spreading their upmarket-multi-destinational-net over Holidaybreak.

The message here rings out loud and clear - that a strong brand and an adherence to quality with sensible revenues and margins will always be better than a brand where price is the only determinate. And spread your portfolio - get your product mix right, in these turbulent times don't rely on one destination that could turn overnight..

(Mmm, isn't that what Thomas Cook were saying..?)

Interestingly, the collapse of Holidays 4 UK, follows only two weeks after they reported a near-tripling of profits and after its managing director, Nuri Mete Faks, claimed that he was "confident of success in 2011 and onwards".

The company's accounts, filed on 20 July, show the company made pre-tax profits of £326,270 in the year to the end of October 2010.

It's unusual for businesses to fail so early in the peak summer season when cash flow is usually at its best. Holidays 4 UK's failure was reportedly triggered by dire trading in May, June and July. .

Holidays 4 UK, which is owned by two Turkish-British families and has been trading from Brighton for 17 years, is now being run by PricewaterhouseCoopers administrators.

"The company has suffered because of the difficulties faced by the travel industry during 2010 and 2011, as a result of the economic downturn," said Ian Oakley-Smith, joint administrator and director at PwC. "The director has determined that the business is no longer able to trade and placed the company into administration. The company will cease operating with immediate effect."

Last year another Turkish budget specialist, Goldtrail, collapsed in July, also appointing administrators from PwC. This failure in fact provided a temporary bonus for Holidays 4 UK.

The company Holidays 4 UK said in its annual report recently: "(Faks) is confident of success in 2011 onwards in view of the failure of the company's two major competitors during the summer of 2010. He considers that the next year will show a consolidation in the market place before sales grow significantly".

The company had a turnover of £35m a year and was licensed to carry 100,000 passengers under the Atol scheme. Most of the Brighton-based company's 18 staff have been made redundant now.

The rescue will cost the CAA about £9.5m, of which about £4.5m will be covered by Atol bonds and other security measures lodged by Holidays 4 UK. The rescue fund, which is already £42m in deficit, will be pushed a further £5m into the red by the latest collapse.

It will put pressure on the CAA to increase its £2.50 levy on all package holiday bookings so as to put the repatriation fund on a better financial footing.