Thomas Cook package holiday prices rise by an average 9%
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Thomas Cook’s package holiday prices have risen by an average 9% and it has sharply increased capacity in Greece as it faces intense competition and higher hotel costs in popular Spanish island resorts. The travel operator’s results revealed how it continues to grapple with the impact of political instability and terror attacks that have weakened demand for trips to Turkey and Egypt. That has seen a surge in the popularity of Majorca and the Canary Islands, resulting in hoteliers there putting up prices by up to 8%.
Thomas Cook said it was facing “intensified competition” in the islands as airlines ramped up flights and has responded by focusing on higher-end holidays “rather than chase volume growth”. “As a result, overall UK charter risk bookings are slightly behind last year’s levels, while pricing is up 9%,” the group said. Shares fell as much as 9% before closing 7.7% down.
The company acknowledged, in the afternoon after its AGM, a high level of shareholder anger over its new Strategic Share Incentive Plan for top executives by confirming it would be scrapped for the current financial year.
It pledged future talks with major investors to ascertain the potential for awards in future amid disquiet on the possibility that bosses could have earned an upper limit of 225% of base salary if all targets were met. No executive received long-term awards in the last financial year, it said, because performance had not been up to scratch. But in the results statement, chief executive Peter Fankhauser said a decision to shift capacity towards Greece was paying off, with current bookings up by more than 40%,
He said demand for trips to Cyprus, Bulgaria, Portugal and Croatia was also strong, “making up for continued weak demand in Turkey”.
Greece was now its “stand-out” destination, with 2.5 million holidaymakers booked for this summer.
It has now recovered back to levels in 2014, before the refugee crisis in the Mediterranean.
Mr Fankhauser said the group remained cautious about the rest of the year “given the uncertain political and economic outlook”.
He said there was no sign that Britons had generally been put off foreign holidays by the weakness of the pound, though this had seen a drop in demand for trips to the US. Revenues for the first quarter to the end of December were up 15% to £1.62bn, largely thanks to the impact of the fall in the pound. On an underlying basis, revenues rose 1%. But pre-tax losses – in a traditionally tough part of the year for the travel industry – widened by 14% to £135m after the group took on more borrowing.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Times are tough in the European travel industry and Thomas Cook isn’t having the best of it, though the good news is things don’t seem to be getting any worse.”