Next year will be even tougher, warns Thomas Cook
Monday, 19 May, 2009
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Thomas Cook chief executive Manny Fontenla-Novoa predicted 2010 will be tougher than this year as a result of rising unemployment and a weak currency.
The retail group recently posted an increase of almost 20% in pre-tax losses to £280 million in the six months to March and said the underlying performance from the UK for this summer was strong.
However, Fontenla-Novoa said the real test for travel companies would come next year.
“We’ve bought our Euros for this year and we’re covered," he said. "but next year will be really tough because of the currency change and the increase in unemployment, which will be much higher."
Prices next year would have to rise by up to 4.5% just to cover currency fluctuations, but Fontenla-Novoa said it would negotiate with hoteliers to ensure price rises of only 2-3%.
However, he said Thomas Cook would emerge from the recession in a stronger position and said people were continuing to buy holidays.
“Those in work have more money and holiday demand is robust,” he said.
The average price of a holiday is up 9% to £536, because the company is selling more five-star, all-inclusive and medium-haul holidays.
Fontenla-Novoa said high street travel agents were vitally important to Thomas Cook, because they delivered high margin bookings. He claimed companies like Kuoni had been affected by a lack of distribution.
“The Internet takes around 35% of our bookings, but only about 15% of the top end bookings. Travel agents make the most profitable brochure bookings because when people are spending around £4,000 on a holiday they want some advice.
“The fall at Kuoni has been due to a lack of having a high street presence. We have 800 travel agencies and I don’t know how many we’ll have in five years’ time, but they are vitally important."
Fontenla-Novoa said the people at Thomas Cook enabled it to differentiate from its competitors. When asked directly if he believed that the service offered on a Thomas Cook holiday was superior to that offered on a similar trip with TUI, he replied ‘yes, I do’.
Not surprisingly, that claim was refuted by TUI. A spokeswoman said: “We agree that people are by far the most important part of a company and that’s why we’ve invested heavily in that area. But we absolutely disagree that Thomas Cook is offering a superior service to TUI.”
Thomas Cook is set to enter the Russian market within the next few weeks with the acquisition of a tour operator and retailer, revealed Fontenla-Novoa. It also wants to move into China, but that will not be until 2010, he said.
TUI announced last month that it had signed joint venture and acquisition agreements in Russia and Ukraine.
Jeremy Skidmore
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