Thomas Cook trims losses with online sales and own brand hotels boost

Thomas Cook Group trimmed winter losses by £27 million to £272 million as “robust” demand for holidays drove growth.

Revenue rose by 3% to £2.9 billion year-on-year in the six months to March 31 reflecting strong winter demand to Spain and long haul destinations.

Group pre-tax losses widened to £314 million from £284 million despite the improvement in revenue.

Online bookings in the UK increased by 15% as the group increased its digital profile.

Overall sales of higher margin holidays and own brand hotels are up by 10% for the summer.

Strong summer demand is reported for Greece and smaller European destinations such as Cyprus and Bulgaria with a double digit growth in bookings from northern and continental Europe.

Cook’s UK and Ireland division reported a 6.5% improvement in first half revenues to £707 million as the business reported strong trading over the winter.

This led to winter losses being cut by £14 million to £114 million, helped by £10 million of operating efficiencies mainly due to lower distribution costs as customers increasingly book online.

The online shift has allowed Cook to “selectively refine” its agency network, including the acquisition of The Co-operative Group’s minority interest in its retail joint venture. Cook paid £32 million in dividends to the Co-op in connection with this and will pay a further £56 million in November.

Cook’s summer 2017 programme is 61% sold, in line with last year with bookings up 12% compared to this time last year, with stronger demand for most destinations.

Egypt has seen a “significant increase” in bookings in recent weeks, with customers attracted by the quality and value of the destination.

“Demand for Turkey has also improved recently, with bookings now in line with this time last year,” the company said.

“Following strong growth last year, bookings to the Spanish Islands have levelled off in a very competitive market.”

For the UK as a whole, including seat-only and non-risk package holidays, both bookings and average selling prices are up by 2% for the summer.

“As we highlighted previously, our UK business is managing through a more competitive market to the Spanish Islands, focusing on selling higher margin, quality holidays rather than pursuing volume growth,” Cook said. “As a result, charter risk pricing is up 8%, while bookings are slightly behind last year.”

Cook also reported a rise in illness-related claims from UK customers, many which the firm believes are “questionable”.

Group chief executive Peter Fankhauser said: “Thomas Cook has delivered a good performance in the first six months. The progress we’ve made on our strategy helped achieve a 3% increase in revenues, with strong customer demand for our holidays despite the competitive environment.

“Importantly, the actions we’ve taken to improve our holiday offering, managing our portfolio of hotels more tightly for quality, are delivering good results.

“Our customer satisfaction score increased by eight points compared with the same time last year.  I am confident we can increase this further, with the roll out of our successful 24-hour hotel satisfaction promise to 80% of customers in our core sun and beach hotels this summer, and other exciting new initiatives in the pipeline.

“We’ve also made great progress in developing our own-brand hotels and resorts, which give our customers a unique Thomas Cook experience.

“We’re planning 11 new hotel launches this summer including our new family-friendly Casa Cook in Kos, complete with its own beach club, and our first hotel in Sicily, the Sentido Acacia Marina.  We also have a further 11 openings in the pipeline for the next 18 months, including at least two new Casa Cook hotels.”

He added: “As we look ahead to the key summer season, we are seeing strong customer demand across most of our markets.

“Greece continues to be the standout destination for Summer ‘17 while customers are also seeking out smaller European destinations like Cyprus and Bulgaria, as well as travelling further afield.

“In contrast, following strong growth last year, bookings to the Spanish Islands have levelled off in a very competitive market.

“I’m also pleased with the progress we’ve made in our group airlines business.  Bookings are up significantly for the summer, boosted by the addition of 15 new destinations to our flight programme, further expanding the choice and value we offer our customers.

“In our German airline, Condor, the actions we’ve taken after the market disruption of last year have started to come through, and we are confident that Condor will return to profit for the full year.

“Despite continued overcapacity in the airline market and strong competition particularly in our UK business, based on current trading we expect underlying EBIT [earnings] for the full year to be in line with current market expectations.

“As I look across the group, I see real momentum behind our strategy for profitable growth.

“By putting a clear focus on giving customers the very best experience when they holiday with Thomas Cook, and making our operations more efficient, I am confident that we can continue to transform the business and deliver increased value to shareholders.”

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