Yahoo Finance Thomas Cook’s Collapse and the Strange Hope It’s Giving Tour Operators
January is a big month for European travel companies. It’s the time of year when people start booking their summer holidays and importantly when tour operators can make a decent profit margin on sales.
This year the landscape is slightly different. One of the most well-known brands, Thomas Cook, has mostly disappeared from the market. Not only that, but the fallout from its collapse continues to impact smaller businesses across the continent.
Strangely though, the demise of one of the biggest sellers of package holidays seems to have persuaded people of the merits of … the package holiday.
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Seventy-one percent of UK consumers said they would likely book a package holiday this year, 10 percentage points up on last year’s total, according to a survey carried out on behalf of Morgan Stanley and released last week. This is the highest figure and the largest year-on-year increase since it started doing the survey five years ago.
Thomas Cook’s departure has, if anything, precipitated a return in interest to the package holiday. Perhaps it’s because of the protection offered by regulator-backed schemes such as the Air Travel Organizer’s Licence (ATOL) in the UK. Anyone who booked a Thomas Cook holiday might not have got to go on it but at least they got their money back. And those abroad when the collapse happened got brought back home.
(It’s worth noting, however, that the level of financial protection is not uniform across Europe. In Germany for example the $122 million (€110 million) insurance policy was not enough to cover every pay-out and the German government was forced to step in.)
In the UK though, given all the economic and political uncertainty of the past few years and the collapse of established companies such as Thomas Cook, consumers seem to favor booking with a package tour operator instead of doing the flight and hotel, separately.
“While the increase in intention to travel abroad is perhaps not surprising, given the clearer UK political outlook and the pound’s strengthening, we had feared that the collapse of the second-largest tour operator could impact perception over package holidays,” Morgan Stanley said in a note to investors.
“That the reverse seems to be the case indicates the resilience of the traditional package, and customers cite the ATOL insurance protection as a key benefit over independent travel.”
In Germany and the UK, the package travel market is roughly around 40 percent of the total.
Who Benefits?
Thomas Cook’s collapse left a whole in the market that was soon filled. Over the past few months competing leisure airlines have added capacity to serve summer sun destinations.
With Thomas Cook out of the picture, TUI increased its UK market share, according to the Morgan Stanley survey. Jet2 was in second place and the relaunched EasyJet Holidays in third.
Morgan Stanley said EasyJet’s impressive early performance “could be a risk to the existing operators such as TUI and Jet2 over time.”
Speaking to analysts last month, EasyJet CEO Johan Lundgren, said he had high hopes for the holidays business.
“The access to great value EasyJet flights and our highly efficient operation had resulted in our holidays on a like-for-like basis, being highly competitive in the market, and we are on track to deliver against our guidance of being at least breakeven in our first year of trading,” he said.
Anecdotally at least it looks like some of Europe’s other players are also benefiting.
Sunweb Group, which operates in a number of European markets, said its summer package holiday bookings were up around 20 percent in January, down partly to a broader product portfolio.
UK-based Greece specialist Sunvil Group is also off to a good start to the year.
Suvil is a tour operator that still uses some charter flights for some of its holidays, a market that has shrunk in recent years thanks to the rise of low-cost carriers and dynamic packaging, where travelers can combine their own flights and accommodation.
“We went into the year ahead and this has been maintained through January. More importantly the prices have held up with less offers and discounting,” said Chris Wright, managing director.
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