Thomas Cook has secured a strategic partnership with Swiss-based hotel property development company LMEY Investments to develop and expand its own-brand hotel portfolio.
The deal emerged came as Thomas Cook Group reported an 11% bookings hike this summer, helped by a revival in demand for holidays to Turkey and Egypt.
The new partnership sees Thomas Cook acquire a 42% stake in German-based operator and hotel management firm Aldiana, which operates eight club resorts in Spain, Greece, Cyprus, Tunisia and Austria, and plans to open another four resorts over the next two years.
Aldiana will sit alongside Thomas Cook’s six existing proprietary hotel brands and follows a distribution tie-in with Expedia.
Thomas Cook and LMEY will also work together to create a joint hotel investment platform to accelerate the growth of the operator’s own-brand hotels.
They are to establish the platform by contributing a minimum of five owned and directly-managed hotel properties between them.
The assets, with a combined value of around £150 million, will be used to develop the platform into a fund focused on acquiring a pipeline of further hotel and resort assets across Thomas Cook’s destination markets.
Thomas Cook chief executive Peter Fankhauser said: “The development of a strong portfolio of own-brand hotels is absolutely key to our success, allowing us to provide customers with a consistent and high quality holiday, whatever their needs.
“Our new strategic partnership with LMEY, with its proven track record of identifying and redeveloping highly successful properties in sun and beach locations, gives us the perfect launch pad to accelerate this critical part of our strategy.
“The acquisition of a stake in Aldiana expands our reach with a premium club-based activity holiday brand that both complements and enhances our existing own-brand portfolio, enriching our holiday offering for customers and giving us an established pipeline of new properties for the future. This is yet another example of the way that we are transforming our business through partnerships.”
Trading update
Thomas Cook Group today reported that summer sales were driven by strong interest in Greece, Bulgaria and Cyprus together with long-haul destinations such as the US.
However, bookings to Spain remained broadly in line with last year, reflecting a “very competitive market”.
In pre-close trading update, Europe’s second largest travel group reported that its summer programme was now 91% sold, up 2% on this time last year.
Summer bookings from the UK are up by 8% – in line with last year – with the programme 89% sold, spurred by strong seat-only sales.
“As highlighted previously, a combination of higher hotel cost inflation and increased air capacity has intensified competition to Spain, leading us to limit volume growth in order to help mitigate the significant margin pressures,” the company said.
“At the same time, our strategy to grow sales of differentiated holidays, especially holidays to our own-brand hotels, is helping to strengthen our competitive position over the medium term.”
Thomas Cook Group’s full year underlying earnings [EBIT] outlook remains unchanged.
The winter 2017-18 programme is 37% sold, consistent with the same period last year, with overall group bookings up by 3%, supported mainly by a recovery in demand for our holidays to Turkey and North Africa, with average selling prices up 2%.
Bookings in the UK are up 5%, against a strong comparative period, with pricing up 3%, the company said.
Overall bookings and pricing for summer 2018 are ahead of tis time last year, reflecting a good performance from the UK and Northern Europe in particular.
Chief executive Peter Fankhauser said: “Thomas Cook has enjoyed a good summer. Customers from across our markets have shown a strong appetite for our holidays, picking a wide range of destinations in their search for the sun, with Greece, Bulgaria and Cyprus proving particularly popular.
“Demand for Turkey and Egypt has also picked up as customers look for quality and value.
“Meanwhile, bookings to Spain, our biggest destination overall, remain level with last year as we continue to manage through what has proven to be a very competitive trading environment, particularly for the UK.”
He added: “The last month has been operationally challenging as our teams took care of the thousands of customers in the Caribbean and Florida impacted by Hurricane Irma.
“I am proud of how fast we acted in the wake of Irma to support our customers, and offer them alternative destinations for their winter sun.
“I’m also delighted about the progress we’ve made strategically.
The alliance with Expedia announced earlier this month will allow us to cut the complexity in our business and focus on our core holiday offering.
“In addition, our new partnership with hotel property investor LMEY, announced this morning, gives us a stake in the popular German premium club brand Aldiana, and a platform from which to accelerate the growth of our own-brand hotels business.”
Fankhauser told the BBC that Spain’s renewed popularity because of safety fears elsewhere was also driving prices higher.
“We have not enough beds for all the demand,” he said.
Spanish hoteliers were “taking a bit of an advantage” of increased demand, but they were also investing their higher profits to improve their facilities.
Chief financial officer announces retirement
Meanwhile, group chief financial officer Michael Healy is to retire in March and will be replaced by financial reporting director Bill Scott, former financial controller of automotive parts repair service Kwik-Fit.