Analysis: In the battle of the big two Cook loses by a head

Analysis: In the battle of the big two Cook loses by a head

There were no surprises in the trading updates from Tui Travel and Thomas Cook this week, and that is the way the City likes it.

Tui Travel presented by far the stronger picture, of course, and could not resist a dig at its rival despite naming no names.

In the UK, Tui Travel reported winter trading “out-performing the market”, “improved yields” and “strong demand in lates”, while summer 2012 volumes “have improved in all key markets” and “differentiated products continue to outperform the market”.

These differentiated products “are difficult for all our competitors to replicate”, it said. Indeed, and doesn’t Thomas Cook know it.

Tui Travel reported almost half its UK summer programme sold out by March 25 and the average selling price up 8% on the same time a year ago, which more than covers inflation. Its customers appear to be paying to get the resorts they want. That is the attraction of differentiated product – it draws a premium.

For the winter season, now drawing to a close, the group reported UK bookings down 8% year on year against capacity down 9% and the average sales price up 4%.

No wonder chief executive Peter Long appeared content. “We are pleased with the development of bookings and pricing in the UK,” he said. Long reported half the company’s programmes sold in Germany and the Nordic region, too. Only the market in France appears to be struggling.

For the record, Tui Travel reported UK summer bookings 6% down year on year against a 7% reduction in capacity – an improvement from the end of January when booking numbers were 7% down on the same point in 2011.

Thomas Cook cannot hope to match this performance, particularly on sales of differentiated product. But it must have been thrilled to report trading “stable” and “in line with expectations”. After all, the group has now managed more than three months without making an announcement that immediately produced “crisis” headlines.

That did not prevent The Guardian reporting the update under the headline: “Thomas Cook hit by slump in foreign holidays”. The inaccuracy of this is remarkable – the company has offered fewer mainstream holidays for sale this year than last and thus sold fewer.

The Financial Times was kinder or maybe got hold of a totally different trading update, reporting: “Thomas Cook sees signs of recovery”.

Cook has removed considerably more from its UK mainstream summer programme than its rival – indeed, it has removed additional capacity in the past two months – and now offers fully 12% less than a year ago. Bookings to date are down 10%, but average prices up 4%. Unless Cook is selling holidays to Mexico at the price of Spain and five-star resorts for the price of three, I would be reasonably pleased with that.

The company’s specialist and independent brands are doing much better, so much so that Cook reported its total UK sales down only 2% year on year.

Following the update, City analysts were generally kinder to Cook than in recent months, while continuing to label the group “a risky investment“. One exception was analyst Panmure Gordon, which The Guardian gleefully quoted as saying: “We question whether there is a viable ongoing business.”

The Financial Times was more measured, reporting “the company remains under a cloud”, which it does. The FT pointed out: “Investor jitters have not been calmed by the continuing lack of a permanent chief executive to turn round the business.”

In investor terms, this is a major fly in the ointment. The company had previously promised an appointment at the end of this month. It is now close to eight months since Manny Fontenla-Novoa departed.

Interim chief executive Sam Weihagen is hardly Stuart Pearce filling in for Harry Redknapp as England manager (forgive the football analogy). From the outside, Weihagen appears to have made rather a good fist of the job – steadying the team after a run of bad results, getting his tactics right and avoiding any howlers.

The worst thing Thomas Cook might do now would be to announce an unconvincing replacement. Woe betide the group if investors considered a new chief executive not up to the job.

The problem is, there is no Harry Redknapp.


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