Late bookings and a “highly competitive” summer 2019 market were focal points of both Thomas Cook and Tui’s recent half-year results. But what does this mean for the two travel giants?
Both operators have seen their summer 2019 bookings hit by weak consumer confidence and intense competition, which has driven down prices in the UK holiday market.
Cook said Brexit-related political uncertainty had led to “softer” demand for summer holidays, which coupled with a “highly competitive” trading environment was contributing to “increased levels of promotional activity” – or discounting.
Peter Fankhauser, Cook’s chief executive, said: “Brexit has had an impact on consumer demand. There was a decline in consumer confidence in the run-up to March [and] there’s been no material change to booking patterns since the delay to Brexit was announced in April. There’s still a cloud above the consumer.”
Cook has cut capacity for summer 2019 across its markets to account for this weaker demand and has sold 57% of its summer holidays so far – on a par with this time last year.
Meanwhile, Tui Group chief executive Fritz Joussen said a late Easter and “competitive pressures” were to blame for a 36% rise in the company’s losses to €287.2 million for the six months to the end of March.
“The main issue is overcapacity into Spain,” he said. “People have better prices because of overcapacity and we have lower margins. It will be a trend continuing into the second half of the year, but we have a counter-effect in Turkey. Turkey will be back big time, although it’s not as important in winter and the benefits will only come in the second half.”
Fankhauser was more blunt. “For the consumer, this is paradise,” he said about the deals on offer.
Joussen added Brexit had weakened the pound, but stressed: “It was not a very strong trend. The stronger trend is late booking. Do I see some speeding up of bookings right now? No, but I don’t see a specific Brexit-related booking pattern either.”
Tui has currently sold 60% of its summer 2019 holidays across all markets, although bookings are down 1% year-on-year.
The two companies’ airlines were also in the spotlight, with Thomas Cook revealing it had received “multiple offers” for all, or part, of its carrier.
Declining to name suitors, Fankhauser said bids were currently being assessed. Lufthansa has confirmed its interest in Cook’s German carrier Condor, while Virgin Atlantic is also rumoured to have made a bid for Cook’s long-haul operation.
“We have received multiple bids – they are credible, but we will not comment on names,” he said.
Cook has also agreed a £300 million “liquidity buffer” from lenders for winter 2019/20. But access to this money will be “principally dependent on progress in executing the strategic review of the group airline”. This means Cook must either complete a sale before winter, or at least make demonstrable progress.
Tui is not one of the bidders for Cook’s airline, confirmed Joussen last week. But he did give an update on how the grounding of Boeing’s 737 Max could affect Tui’s profits.
The operator expects to hear by the end of this month whether the Max will re-enter service in time for the summer peak. “We have two scenarios – July, or not at all for the summer season,” he said.
Tui estimates the earlier date for the Max’s return would reduce profits by 17% (€200 million), while a full summer grounding would have a 26% impact (€300 million) on expected full-year pre-tax profits of €1.18 billion.
Cook’s Fankhauser was keen to emphasise the expansion of its own-brand hotels, particularly Casa Cook and Cook’s Club, which he said could appeal to millennial travellers.
“We’re one of the leading sun and beach hotel operators, with 200 hotels and more than 40,000 rooms,” he said. “We want to grow that to 250 hotels by 2021 with more management contracts.”
Cook has opened 12 new own-brand resorts in the past two months, with eight more due to follow during the rest of 2019. This includes four Cook’s Clubs in Mediterranean destinations, as well as its first family-orientated Casa Cook in Crete.
Tui, meanwhile, plans to concentrate on growing its hotel, cruise and destination experiences divisions, while increasing digitisation.
“Destination experiences is one of the big bets for the future,” said Joussen. “We are creating an open digital platform for our own clients and third-party customers, like Chinese tourists in Europe. These can be additional customers in our hotels.”
Leave a comment below or email email@example.com and let us know your thoughts.