April 15, 2009 / 5:54 PM / in 9 years

Credit squeeze fells Conquest Vacations

TORONTO (Reuters) - Canadian tour operator Conquest Vacations suddenly shut its doors on Tuesday, stranding as many as 2,000 travellers in what may augur a shakeup in an industry already beset by economic crisis.

<p>A plane approaches to land in Rome September 22, 2008.REUTERS/Max Rossi</p>

Toronto-based Conquest Vacations said on Internet sites and on telephone voice recordings the shutdown was immediate, and blamed price wars and a credit squeeze stemming from the global economic crunch for its demise after 37 years in service.

“Unfortunately this has been a result of overcapacity and price war among the major tour operators, unrealistic and unreasonable demands by the credit card processing companies, credit squeeze and economic turmoil in recent months making it impossible for companies like Conquest to continue in business even after weathering many storms over the past 37 years,” Conquest said.

The move was positive for rival Transat AT., whose stock was up 34 Canadian cents at C$9.44, and Macquarie Capital Markets Canada issued a note recommending clients purchase Transat stock.

“We believe today’s news is the beginning of the restructuring of the Canadian tour operator industry,” Macquarie said.

Tour operators and airlines have grounded planes and cut capacity globally to adapt to slowing demand as the international economic crisis strains business-travel budgets and holiday spending.

The industry has also been shaken by wildly fluctuating exchange rates and fuel prices that have varied by more than US$100 per barrel in the past year, especially for operators whose hedges backfired.

“We’ve been characterizing this as the year of the deal,” said Stuart Morris, whose online travel retailer itravel2000 carried Conquest vacation packages.

“We know that the tour operators, the travel industry, has been living on very very thin margins, which is great for travellers, but not great if you’re a tour operator.”

He estimated that between 1,000 and 2,000 travellers to Mexico and the Caribbean had been stranded by Conquest Vacations’ abrupt end to operations.

“There is too much capacity and pricing is overly aggressive, affecting every tour operator’s profitability,” Macquarie said. “Something has to give. Eventually industry capacity will have to be reduced to rationalize pricing.”

Reporting by Pav Jordan; editing by Janet Guttsman

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