Thomas Cook collapse hits profits at On the Beach
Online travel agent struggles to contain impact of UK holiday company’s demise
Online travel agent On the Beach said profits fell by more than a quarter in its last financial year as it struggled to contain the impact of British package holiday group Thomas Cook’s collapse.
On the Beach, which was booking about 15 per cent of its customers on to Thomas Cook flights each year, said on Wednesday that profit before tax for the year to September 30 plunged 26 per cent to £19.4m.
The online travel group, which warned in September of a £7m one-off hit to revenues from Thomas Cook’s failure, has not only had to pay out refunds to its customers who found themselves without a flight. The loss of Thomas Cook has also reduced the number of airline seats available in the market and pushed ticket prices higher, On the Beach chief financial officer Paul Meehan said.
On the Beach has undertaken a “massive operational programme to fix bookings”, Mr Meehan said, though he also argued that Thomas Cook’s failure gave On the Beach an “unprecedented opportunity” to increase market share.
The group’s share price rose 1 per cent on Wednesday morning to 439p.
Thomas Cook’s failure in September left more than 600,000 holidaymakers stranded abroad. The company sold about 9m airline seats in 2018, according to analysts at Morgan Stanley, of which about 60 per cent were for package holidays.
Rivals Tui and Jet2 have announced the addition of about 3m seats for next summer’s holiday bookings, leaving two-thirds of Thomas Cook’s former capacity as yet unfilled.
This month, EasyJet unveiled plans to relaunch its package holiday business before Christmas with an aim to target 1m customers in its first year.
“We are increasing marketing spend materially in the first quarter of next financial year . . . even though [that will mean] advertising at a time of year when we wouldn’t spend normally,” Mr Meehan said.
Revenues for the year were up 35 per cent to £140.4m thanks to On the Beach’s acquisition of Classic Collection, a luxury beach holiday brand that it bought for £20m in March, and to the expansion of its long-haul offering.
Analysts at Citi warned that margins in 2020 would be affected by the boost to marketing efforts but that this should be offset by On the Beach’s ability to take market share.
Mr Meehan added that he was not concerned by the imminent launch of EasyJet’s package holiday business: “We don’t think it’s easy to build a tech platform selling holidays so while they are an attractive brand it’s not a major concern.”