Big Interview: Neilson forecasts good conditions for growth in 2017 and beyond

Big Interview: Neilson forecasts good conditions for growth in 2017 and beyond

Neilson chief executive David Taylor talks to Lee Hayhurst about how the operator is expanding its horizons to help it weather the economic and geopolitical storms that impact travel

Any successful travel boss has to become used to the stormy economic and geopolitical waters that regularly lash the industry.

But few have to be wary of the real thing when choosing a parking space at their office in case a rogue wave breaches sea defences and splashes their prized TVR sports car.

That’s the occupational hazard Neilson boss David Taylor faces from time to time at the firm’s base on the Brighton seafront in the town’s bustling marina.

However, when the sun is shining and the seas are calm there can’t be a more serene or appropriate spot for an activity holiday provider to be located.

“We have a fantastic spot in Brighton Marina, and with a backdrop of sea, yachts and the odd great sunset, it’s a perfect reminder of what our summer holidays are all about,” he says.

Taylor forecasts calm market conditions ahead for Neilson, the ski and beachclub operator which was bought from Thomas Cook for £9.15 million in 2013 by Risk Capital Partners.

“We are pleased with the progress we have made over the last three years, having put a great platform in place from which we are able to build,” he says.

“Whereas the market is not easy, we are probably in the best position we’ve ever been in to move forward.”

Product mix 

In recent years Neilson has faced the double whammy of disappointing snow conditions hitting its winter programme and the collapse of the Turkish market.

As a result the operator has made changes and will continue to tweak its product mix to spread its risk.

This is tougher in the Alps, due to accommodation supply being more fragmented, although the operator will add to its exclusive Mountain Collection for 2017-18 in high-altitude snow-sure resorts.

For summer, Neilson was forced to drop three of its four Turkish resorts last year as demand slumped.

This also prompted it to make a small number of redundancies and came as a management shake-up saw Taylor become chief executive and Richard Bowden-Doyle shift from that role to chairman.

“There was a lot of heavy lifting to do to take us out of Cooks that required us both to roll our sleeves up,” says Taylor.

“But it was always in the plan when we bought Neilson with Risk’s backing that Richard would get stuck in, make change happen, create a stable business and then step back.”

Bowden-Doyle is now leading the search for new Neilson beachclub opportunities in the western Med for 2018, as well as a likely move into long-haul beyond that.

Not many hotels meet Neilson’s requirements – “You have to kiss 
a lot of frogs to find a prince,” says Taylor – but agents can expect one or two new properties in Spain or Italy.

The latter’s economic woes make it a potentially happy hunting ground because many hotels have been taken over by banks, are empty and would benefit from investment.

Turkey’s travails

Traditionally, Turkey has represented 40% of Neilson’s programme and Greece 60%, but the operator’s move to spread its footprint began this year with the addition of Sardinia and Croatia.

“Both Greece and Turkey are great destinations for us,” says Taylor. “Beachfront hotels and sea and wind conditions are perfect for our water-based activities.

“From a tourism perspective what’s happened in Turkey is deeply disappointing. It’s too big a destination to not be part of the Mediterranean travel scene.

“It’s got a great culture and there is a passion for hospitality. I hope it comes back strongly. The difficult question is when.

“We hope to build our Turkey programme back in the future, but we have moved quickly to add some great new destinations to our historic geographic mix.”

Partly due to the switch away from Turkey, early January booking comparisons were favourable, with Neilson tracking 40% up year on year, ahead of this year’s 25% capacity hike.

But, even accounting for the Turkey factor, Taylor believes there is underlying strength in the market.

“Demand is good,” he says. “We’ve a long way to go but the market seems to be reasonably buoyant. There’s no evidence that uncertainty is holding people back.

“I would expect our uplift to last because last year we were carrying Turkey in the first quarter.”

Neilson ended its financial year to November 2016 showing a 5% operating profit margin, as measured by earnings before interest and tax (Ebit), and having seen record trading for its winter and Greece programmes.

Figures were pegged back by costs of restructuring and exiting Turkey, but Taylor says 2016 was the second best of the three years since the Cook sale.

This year, although winter results will underperform last year’s due to a weaker pound, an Ebit margin of 5.5%-6% is expected to make it the best year since coming out of Cook.

Of course, predictions in travel are always made cautiously but, unpredictable external shocks aside, Taylor believes Neilson is operating in a sweet spot.
Package demand

It has adapted to the rise of budget flying to offer flexible‑duration packages. The number of customers opting for such flights is expected to grow but still accounts for only 5% of capacity.

Taylor says: “In the early noughties there was a huge move towards dynamic packages and ‘doing your own thing’, but over the last few years it’s been much more stable.

“Package volumes lodged with the CAA have been static and everyone has had to sharpen their game and become a lot more efficient so they are not out-priced by DP providers.

“There’s still huge value to what tour operators do because they make it easy for people. And we’re seeing a major change with people wanting to doing things to de-stress.

“What we offer is the chance for everyone to do their own thing guilt-free: dad cycles, mum plays tennis, the kids are in the kids’ club.

“For dad it may not be the best cycle holiday, but it’s a bloody good one and better than disappearing at 7am on a Saturday to cycle when he’s not seen the kids all week.

“The tour operator industry has done a great job re-engineering itself over the last 10 years around efficiency, true customer focus and product differentiation.”

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