Pegas Tour operators, the companies that are responsible for providing tour operators with tours to the world’s most popular destinations, are not profitable, according to a report by the consultancy firm McKinsey.
The report said the companies provide tours to only a small proportion of their customers and are vulnerable to “weakness in their business models”.
“Pegas Tour Operators are struggling financially due to the challenges of operating in the world of travel, which is currently a highly competitive market, and are at the forefront of the industry’s efforts to improve their business model,” McKinsey’s report said.
“The companies do not see significant future growth opportunities due to rising demand for tour operator services in emerging markets.
The companies are therefore focused on a long-term strategic shift to develop the Pegas touring business in emerging market countries,” it added.
The McKinsey report said Pegas’ business model is driven by high ticket prices, “a lack of infrastructure in many markets and low revenue growth”, and is dependent on strong relationships with tour operators, particularly in developing markets, as well as high operating margins.
Pegas is one of the world, including the United States, most popular tour operators.
In February, the world was treated to a spectacular display of fireworks as Pegas tours were the first to take part in the London Olympics.
Tour operators are currently facing stiff competition from online platforms and technology firms such as Alibaba Group Holding Ltd, which recently launched a tour booking service that competes directly with Pegas.
Earlier this month, the British government said it would ban online booking services such as booking Pegas tickets, citing “a significant risk to national security”.
Pegas is also facing pressure from regulators in India, where it operates four out of six major tour operators in the country.
India’s tour operators are facing the threat of “tourism chaos” and are being targeted by a “federalist” movement that wants to see the government “shut down” the entire industry.
“The Indian government is being increasingly focused on banning online booking platforms and has effectively been pushing the Indian government to take a tough stand against online booking,” McKinseys report said, adding that this was putting “the entire Indian tour operator industry in a precarious position”.
In January, India’s government banned online booking in all its ticketing and ticketing agency sectors, which will “restrict the access of online booking platform providers to the Indian market”, the country’s commerce and industry minister said.
McKinsey’s research found that “the Pegas booking industry is in an incredibly precarious position” as the industry relies on “high ticket prices” to generate a profit and has “little visibility into the state of the market”.
According to McKinsey, the problem of weak revenue growth was the “most significant factor” behind the decline in revenue, with the decline affecting “every tour operator in India”.
This is not the first time McKinsey has warned about the potential for a “touring business collapse”.
McKenzie said in September that the industry was facing “significant uncertainty” and the “unprecedented” growth of the online booking industry meant “the industry’s revenue and profitability are likely to be threatened”.