Some UK-based travel companies and tour operators will have to "radically" alter business models to adapt to new market conditions and to survive during 2012, according to KPMG.

The advisory firm said that 24 operators went into administration last year and expects more to follow over the next year, with the traditional high-volume model in "terminal decline".

KPMG highlighted the growth of low-cost carriers; online booking; and ongoing economic uncertainty could make 2012 one of the "most challenging" for the sector.

Fuel cost and Air Passenger Duty increases will also have an impact on tour operators over the coming 12 months, with KPMG outlining five steps that businesses should consider.

The advisory firm recommends investment in online and mobile technology; the offering of "dynamic products" to meet changing customer needs; and focussing on cost reduction.

Elsewhere, KPMG said tour operators and travel companies should look at ensuring a range of "strong brands in high margin spaces", while maintaining a healthy balance sheet.

Richard Hathaway, head of travel, leisure and tourism at KPMG, said: "Businesses who fail to take appropriate action are likely to have problems in the short to medium term.

"Businesses that still have significant reliance on committing to capacity the year before the sale season will be less able to adapt to unexpected changes in demand, and thus reach breaching covenants or entering financial distress."

Details: www.kpmg.com

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