Thomas Cook chief: Spain demand decreasing but selling prices continue to rise

Speaking after the announcement of the group’s full-year results, Peter Fankhauser said he expected demand for Spain to “balance out”.

Group revenue was reported at £9,007 million, up 9% on a like-for-like basis (adjusted for foreign exchange), while underling Ebit (earnings before interest and taxes) was up £24 million to £330 million for the 12 months ended September 30.

Fankhauser said: “Spain was having an increased demand because of the turbulence we have seen in the eastern Mediterranean. So that is a hang over from 2016.

“My experience tells me that it is balancing out. As soon as the Turkey and eastern Mediterranean destinations have an increased demand, the Spanish hoteliers see that they have to adapt their prices to level it out.

“It can still be that in 2018 peak season we have higher prices, but we are seeing early signs that in shorter seasons the Spanish hoteliers are very reasonable in their pricing.

“It’s not going to be relaxed totally in Spain from the margin side, but it’s more relaxed in 2018 and then for sure in 2019 because then I expect a totally balanced situation throughout the Mediterranean destinations.”

For Thomas Cook Group, holidays to Spain accounted for 42% of summer 2017 bookings, but Fankhauser expects that proportion to decrease as demand is redirected.

“We are redirecting capacity into Egypt,” he said. “The historic average was 30% [the proportion of Spain bookings], and I think in summer 2018 it will normalise back down to 30% again.”

Asked whether he feared competition from other travel companies also putting capacity into Turkey, Fankhauser said: “We have a clear advantage is we are market leader into Turkey. We feel really well prepared for the competition there.”

But despite this decrease in demand for Spain, average selling prices for the country will increase for next summer.

This summer it was up 6% for Spain, and Cook expects it to increase 6-10% next summer in high season.

“To be fair to the Spanish hoteliers it’s not just about demand,” said Fankhauser. “They invested a hell of a lot of money in refurbishing their properties so customers are paying more for quality in many cases.”

He added that customers looking for cheaper breaks should consider Turkey, Tunisia or Egypt “where we pay in sterling so are not impacted by this weak pound”. “The value for money there is fantastic,” he said.

“In Spain he has to pay more. It is likely that especially in high season the prices of Spanish holidays will go up about 10%.”

Elsewhere, Fankhauser added that the company’s Tunisia programme, which launches in February, was “selling reasonably well”.

“We are starting with a small programme and all the hotels are hand picked. It’s coming back but not as big as it was before, but that takes time,” he added.

With regards to Egypt, ha said: “We have a strong growth out of all the markets, especially out of the UK and even with the strong growth we are far away from the situation pre Arabian spring.

“There is big potential there still but we can only fly to Hurghada and Marsa Alam. There is no indication when Sharm airport may reopen and we totally rely on government advice for that.”