The UK leisure and tourism sector is dynamic and competitive in nature, with ever-changing regulations and unpredictable trends that mean businesses must be both responsive and agile.
In recent years, the domestic holiday boom has taken an upturn, with geopolitical tensions causing a sense of anxiety about travelling overseas. Not only this, but the inconsistent global economic performance means that the trend of holidaying in the UK, rather than jetting off abroad, is likely to stay.
While this has brought a wealth of opportunity to the UK market, running a holiday park here doesn’t come without its challenges. The great British weather means that income is affected by seasonal peaks and troughs, with an influx of guests between April and September, and very quiet periods during the autumn and winter.
Because of this, robust financial management is critical to the success of any UK holiday parks, allowing profits to be felt across all 12 months of the year - not just in the summer months.
Successfully managing cash flow through the seasonality that’s inherent in the holiday park industry requires foresight, strategic planning and financial expertise. If not done correctly, businesses are sure to experience financial instability during the quieter months.
Budgeting and forecasting are a critical part of cash flow management. Businesses must create accurate, realistic budgets that anticipate off-season challenges and fluctuations in revenue. By doing this, they will be able to more carefully allocate resources across the year, without compromising operational efficiency.
For example, many holiday parks shift their focus towards meeting high demand in the summer, investing in seasonal teams and excessive supplies, without thinking about how this money could be better used in the future. Of course, extra people and supplies will always be needed during peak seasons, but effective budgeting and forecasting will reduce overspend in these areas and leave healthier reserves for when they’re really needed.
Contingency planning is another key element of cash flow management, especially in the unpredictable world of leisure and tourism. Identifying potential risks helps to minimise negative impacts and allows operations to continue smoothly if the worst does happen, such as extreme weather, political instability and health crises. By establishing these risks and a clear plan on how to respond to them, businesses can ensure they have a safety net of reserves to navigate through unexpected challenges.
And if push comes to shove and capital really does become an issue in the down seasons, businesses do have the option to take out a loan - but should do so with caution. Taking on a loan without a clear repayment plan can lead to a snowball effect of accumulating interest and financial strain. Holiday parks should only secure financing when really necessary and ensure that the repayment plan aligns with their cash flow cycle; otherwise, the debt can soon become overwhelming.
Knowing how to make money go further can put holiday parks at a great advantage when it comes to staying afloat during the quieter months. There are many different types of savings and investments, and potential risks with investments in particular, so knowing how and where to invest extra cash is key.
If significant cash deposits are being held in business bank accounts after a strong summer season, there are ways to earn higher interest rates instead of leaving money in a high street bank account.
There is a range of software available that allows cash to be distributed across different bank accounts with interest rates of around 4% on average, compared to the typical high street bank rates that are closer to 1%. Businesses should aim to retain £85,000 in each banking institution for full FSCS protection and increased interest rates - giving more return on cash savings, with very little hassle.
Investing in business financial protection is also highly recommended to help protect holiday parks from future loss. Business protection provides cover to ensure businesses can continue to trade with minimal disruption should a director, partner, member or key employee suffer a critical illness or die. There are many types of business protection, including key person protection, term assurance, income protection, critical illness cover, long-term care and shareholder protection, all providing significant financial coverage in these unforeseen circumstances and a deep peace of mind in the meantime.
Having a strong, resilient financial management plan in place - which implements effective cash flow tactics and clever savings techniques - is vital for the year-round growth of holiday parks.
Duncan & Toplis provides accounting and business services specifically designed to support holiday parks, including budgeting, forecasting and strategic financial planning. To find out more, contact our team of experts.
