On the Beach is taking over specialist operator Classic Collection Holidays for £20 million.
Classic Collection reported earnings [EBITDA] of £2.6 million and assets of £18 million for the year to October 2017.
On the Beach pledged to invest to grow Classic Collection’s portfolio of luxury holidays.
The group will support plans to build and launch an online booking portal to provide agents with access to a portfolio of mainstream beach holiday product under a new brand ‘Classic Online’.
Classic Online will be available exclusively through travel agents and will not be a consumer site.
On the Beach said it believes the acquisition will be earnings enhancing in the first full year of ownership, including some initial investment.
Classic Collection dynamically packages luxury beach holidays and sells its packages through a network of third party travel agencies including high street independents and homeworkers.
The operator employs 124 staff at its Worthing headquarters, who will continue to manage the relationships with travel agents.
On the Beach said: “The Package Travel Directive that came into effect on 1 July 2018 has meant that travel agents that dynamically package holidays take on onerous responsibilities that make it increasingly difficult for independent agents to do so cost-effectively.
“For agents, Classic Online will provide many of the benefits of dynamically packaging themselves, but without the risks, as Classic Online will be the package organiser.
“Both Classic and On the Beach are package organisers so the group already has the infrastructure in place to fulfil these responsibilities.”
Classic Collection’s existing management team, headed by managing director Nick Munday will continue to run the business.
On the Beach Group chief executive Simon Cooper said: “We are pleased to welcome Nick and the Classic Collection team into the On the Beach family.
“We are excited about the opportunity to access the circa five million short haul beach customers that book holidays offline each year.
“Classic Collection has an excellent reputation in the industry and we look forward to working with Nick and the team to expand both of our product offerings.
“With regards recent trading, the resilient, flexible and asset-light nature of On the Beach’s business model, combined with our advanced technology, has allowed the business to swiftly adapt to the unprecedented three month heatwave and deliver an impressive performance.”
Munday said: “I am thrilled to be joining forces with Simon and the team at On the Beach.
“Partnering with such an innovative market leader will give our loyal network of agents access to an even wider portfolio of mainstream beach holiday product through the launch of Classic Online together with further investment to broaden the luxury offering of Classic Collection.”
On the Beach also reported that the exceptionally hot UK weather that has been prevalent over recent months, combined with the football World Cup, had “supressed” holiday demand.
“This has impacted our headline revenue growth during the period, but the weaker demand has driven a significant reduction in the group’s marketing spend, ensuring growth in revenue after marketing costs has remained strong,” the company said.
“This is further testament to On the Beach’s resilient and flexible business model as we have previously demonstrated in similar circumstances.
“Whilst August and September are important trading months for the group, the board continues to expect that adjusted PBT [profit before tax] for the financial year will be broadly in line with management expectations.”
On the Beach was bought by Inflexion Private Equity in 2013 before being floated on the London Stock Exchange in 2015.
It was founded by Simon Cooper in 2004 and turns over around £80million annually.
Classic Collection has an Atol to carry 35,000 passengers annually, selling premium hotel holidays in Europe, North Africa, Bermuda and the Caribbean.
It was set-up in 1988 and is based in Worthing, employing 120 staff.
The operator turned over £62 million in 2017 and reported pre-tax profits of £2.5 million.
It partnered with Silversea Cruises this year to sell land and sea packages.