Thomas Cook chief optimistic despite security concerns hitting sales

Holiday bookings for this summer are being put on hold by consumers in the wake of terrorist attacks in Paris and Istanbul, Thomas Cook disclosed today.

Security concerns have knocked consumer confidence, causing some people to postpone holiday plans, leading to an overall later booking pattern and capacity being trimmed.

The warning came two days after rival Tui Group reported a 40% slump in summer bookings to Turkey.

Chief executive, Peter Fankhauser, said the company had anticipated a shift away from Turkey as early as October, with bookings not as strong as they usually would be at that time of year for the destination.

In a trading call this morning he said that Cook has rerouted 1.2 million airline seats away from Turkey, Tunisia and Egypt.

800,000 of these were from Turkey, the equivalent of moving 29% of capacity from the destination.

Fankhauser said Turkey makes up 18% of the business’ guest numbers. Destinations such as Spain, Greece, Cyprus, Bulgaria and long-haul countries including the US and Cuba were faring well as a result.

“In the aftermath of the terrible incident in Istanbul we saw a sharp drop in demand to Turkey,” he said. “We planned a 29% shift in capacity; that seems to be the right level of capacity but we are remaining flexibility.

“Turkey is a good value for money destination and we see from Google searches that people still want to go to Turkey.

“We are seeing the demand coming back to Turkey, like what we saw after other terrible events (such as Paris). It’s a recovering market.”

Fankhauser insisted he didn’t see the shift to western Mediterranean destinations as permanent, saying he sees it occurring “for the time being”.

Cook said: “Although bookings have been disrupted by geopolitical concerns which have affected consumer confidence, in recent weeks we have seen clear signs of recovery.

“Having anticipated a higher risk of disruption this year, we have worked proactively to rebalance our programme to match changes in customer demand, adjusting our in-house flying capacity and route networks, and securing additional hotel rooms particularly in the western Mediterranean where demand is strongest.  

“This leaves us well positioned to manage demand and accommodate customer preferences for the remainder of the booking period.”

Sales for summer 2016 are 2% behind last year at 29% sold, with UK average prices for package holidays up by 4%, reflecting a 7% rise in online sales.

The group’s overall bookings for the summer are down by 5%, partly due to charter capacity cuts of 3%.

The company described winter 2015-16 trading as being in line with expectations with 82% of the programme sold – broadly the same as the previous year. Winter bookings from the UK are down by 2% with average selling prices up by 2%

Cook’s traditional winter losses for the three months to December 31 increased by £1 million to £116 million year-on-year.

Fankhauser, said: “We’ve made a good start to the year, despite challenging trading conditions. 

“Having acted fast to offer our customers a broad range of alternatives to Tunisia and Egypt, we delivered a 1% increase in revenues in the first quarter.

“We also increased our gross margin by 20 basis points thanks to our focus on selling higher-quality package holidays.  Sales of holidays to our own-brand hotels grew by a further 24%, following strong growth in the prior year.

“Looking across the group, our Northern European business continued to see strong customer demand over the three months, while the turnaround in our UK business delivered further improved results. 

“Elsewhere, our businesses in Germany continued to face tough trading conditions in a very competitive market. Overall, trading for Winter 2015-16 is robust, and we have been able to maintain good margins across almost all of our source markets, helped by a strong online performance.”

He added: “It is clear that the awful attacks in Paris and Istanbul impacted confidence, leading some customers to delay booking their holidays. 

“However, we’ve seen clear signs of recovery in recent weeks: customers still have money in their pockets, and want to go on holiday.  

“In this uncertain geopolitical environment, we are also seeing more of our customers choose a package holiday, valuing the greater security it provides.

“We have the scale and flexibility to give customers a wide choice of destinations, in both the western and eastern Mediterranean, the Caribbean and other long haul destinations, and our experienced high street and call centre staff are on hand to offer customers the best advice.

“We will continue to focus on delivering our strategy – strengthening our own-brand hotels and flights offering, and investing to ensure that customers who choose Thomas Cook get consistently excellent customer service. 

“Thomas Cook is now a significantly stronger and more resilient business, and we are well positioned in a challenging market. 

“We are maintaining our previous guidance for the 2016 financial year, provided that the recent recovery we have seen in customer confidence is sustained.”

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