Thomas Cook links up with Swiss group to accelerate hotel growth
Thomas Cook said it was confident of hitting full-year targets after a good summer season and agreed a deal with Swiss hotel investors to buy a stake in a German resort operator and jointly invest in growing the UK company's own-brand hotels.
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The FTSE 250-listed group has formed a "strategic partnership" with hotel property developer LMEY Investments, with an initial acquisition from LMEY of a 42% stake in German tour operator Aldiana, which operates eight premium, family activity focused club resorts in Spain, Greece, Cyprus, Tunisia and Austria, with plans to open another four over the next two years.
"Aldiana will sit alongside Thomas Cook's six existing proprietary hotel brands, bolstering Thomas Cook's own-brand hotel portfolio with a popular club offering and broadening its reach to new customers," the company said.
The pair have also agreed to contribute at least five of their own owned and directly-managed hotels between them to create a "joint hotel investment platform, in order to accelerate the growth of Thomas Cook's own-brand hotels portfolio".
These initial hotel 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.
The company's finances were little changed from its recent third-quarter update, while group chief financial officer Michael Healy, has decided to retire, with Bill Scott, current director of financial reporting, appointed as his successor, effective 1 January 2018.
In a pre-close statement at the end of its financial year, Thomas Cook reported 11% growth in bookings for summer 2017 with a 1% rise in average selling prices, with 91% of the programme sold.
Overall UK bookings were 8% higher with pricing in line with last year, with charter risk package holiday bookings up 2% and pricing up 7%.
A combination of higher hotel cost inflation and increased air capacity has intensified competition and prices for Spanish holidays, leading management to limit volume growth in order to help mitigate the significant margin pressures, helped by growing sales of "differentiated holidays" including to its own-brand hotels.
The Winter 2017/18 programme was confirmed as 37% sold, similar to the same period last year, with overall Group bookings up 3%, supported mainly by a recovery in demand for Turkey and North Africa, with average selling prices up 2%.
UK bookings were up 5%, against a strong comparative period, with pricing up 3%, while Northern Europe bookings and pricing up 6%, and Continental Europe bookings 4% ahead and pricing in line with last year.
Summer 2018 has seen early bookings and pricing ahead of last year, reflecting a good performance from the UK and Northern Europe in particular.
On the new hotel investment agreement, 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."
Fankhauser, who has said he wants the travel company to "walk in the flip flops of its customers", is looking to keep up with the changing holiday market through partnerships, having entered into another alliance with Expedia earlier this month, whereby the US company will become the preferred provider of hotels for Thomas Cook and provide its booking platform to support all city break and hotel-only sales in Europe.
The share price rose 0.5% in early morning trading before falling 1% to 119.8p by 0930 BST.
Analyst Laith Khalaf at Hargreaves Lansdown said Fankhauser is "clearly in the mood for a deal as he seeks to revive Thomas Cook’s ailing fortunes", with Tuesday's deal allowing it to strengthen its own brand offering where it can exert greater influence over the holiday experience.
"Holidaymakers also appear to have an increasing appetite for trips to Turkey and North Africa once again, following a period where political turmoil and terrorism took a toll on demand in these regions. This helped to boost booking numbers for Thomas Cook, alongside continued demand for popular destinations such as Greece and Spain.
"The group continues to anticipate full year operating profit will fall in line with current market expectations, and so the share price was largely unmoved by this latest trading update."