LONDON AND PALMA
THOMAS Cook, Europe's second biggest travel firm, said UK bookings had slowed as cash-strapped Britons, grappling with the government's fiscal squeeze, are sacrificing their annual two weeks in the sun after a brisk start to year in holiday sales, in particular to Spain and the Balearics. Cumulative (summer) bookings remain ahead in most markets, although the rate of booking intake has slowed noticeably in the UK as a result of continued economic uncertainty, the company said yesterday.
Thomas Cook said cumulative summer bookings in Britain were one percent ahead of last year, sharply down from growth of 6 percent when the group last updated the market and 50 percent lower than how the UK market was performing as a whole just a month ago with holiday sales up two percent, year-on-year with the big winners being Spain and the Balearics, in particular.
British consumers have been increasingly unwilling to spend as muted earnings growth and higher inflation, fuelled by January's rise in VAT and hikes in oil and food prices, bite into real incomes.
They are also worried about job losses and welfare reductions related to government spending cuts, as well as the prospect of higher interest rates.
Historically Britons have been reluctant to give up their hard earned summer holiday even when they are cutting back in other areas.
On Monday Peter Long, Chief Executive of Europe's biggest tour operator, TUI Travel, which is majority-owned by German company TUI AG, told Reuters demand for annual holidays was proving resilient.
TUI Travel will update on trading tomorrow.
Thomas Cook said cumulative summer bookings were up four percent in Central Europe (Germany, Austria and Switzerland), up 11 percent in Northern Europe, up 9 percent at Airlines Germany but down 1 percent in West/East Europe.
Average selling prices were up 4 four percent in Britain and up three percent in Central Europe.
In response to the continuing tough British trading environment Thomas Cook has reduced capacity to around last year's level.
Shares in Thomas Cook, which prior to yesterday's update had lost 39 percent of their value over the last year, were down 1.1 percent at 165 pence by 11am, valuing the business at about 1.4 billion pounds.
We struggle to identify near-term positive catalysts for the Thomas Cook share price to move appreciably upwards, said Panmure Gordon analyst Simon French,
He is forecasting 2010-11 earnings before interest and tax (EBIT) of 397 million pounds.
Thomas Cook confirmed last month's forecast that unrest in Egypt and Tunisia would wipe around 20 million pounds off second-quarter profit.
Overall the business is performing well, given the disruption caused by the unrest in Egypt and Tunisia, said Chief Executive Manny Fontenla-Novoa.
TUI Travel's Long had said on Monday the group would factor in a hit of up to 40 million pounds each year from natural disasters and conflicts, having also seen its bookings hit by North Africa's political unrest.
The threat of Spanish airport strike action, which hung over the country for nearly two weeks, also hit holiday sales and led to cancellations.
The strikes have since been called off but the news, which hit the front pages across the UK, did damage demand for Spain and the Balearics with the UK flight industry reporting a marked drop in interest for flights to Spain on and around the planned strike dates.
The Spanish tourist board has since sought to address the damage done but it appears that there are other exterior factors which are continuing to hamper the tourist industry. However, as far as the Balearics is concerned, some hotels are already fully booked for much of the summer season, so any slow down in the market will probably affect competing destinations.