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Given the positive economic back drop, what are we to make of the recent trading updates from Tui and Thomas Cook, the latter newly adorned with its smiling logo?
The City gave its immediate reaction, which was to mark Thomas Cook’s shares down by 7% and Tui’s up 2%.
But scratch away at these trading numbers and I think both of the travel giants look to be in decent shape moving forward – with summer 2014 limbering up to be one of the best summers in recent memory.
Tui’s numbers looked the best, with a positive vibe from the senior team, accompanied by an upgrade to its profits forecasts of 11%.
Tui also announced that average selling prices (ASPs) were up 5% year on year in the summer season, and sales up 2%, while for the beginning of the winter season ASPs had increased by 6% and sales by 4%.
Crucially, Tui has already sold 31% of its mainstream winter programme. I was also fascinated by two key online numbers: that online sales now account for 48% (up from 45% in 2012) and that Tui’s wholesale business had another cracking summer in 2013. Looks like Tui’s technology master plan is panning out as expected.
Over at Thomas Cook there was a more subdued tone, although numbers were in line with analysts’ expectations.
The bad news was that booking numbers for 2013 were down and Cook had experienced a slow start to its winter trading, although to be fair it did declare that “UK bookings and prices have been relatively stable as we approach the end of the summer season and trading in our other markets has been in line with or above our expectations”.
Investors might also be slightly concerned that its cost base seems to be misbehaving, with a £10 million hit to group operating profits, but by most measures it seems like the strategic plan to lower the overall group overhead is powering ahead on schedule.
I’d also expect to see new, higher-quality products to make a meaningful impact in 2014, helped along by massively improved cash flow – Panmure Gordon analysts Karl Burns observed that free cash flow for Cook had increased by £303 million year on year in the past nine months.
The big story with Thomas Cook is now an execution-based one – can the executive team deliver on their ambitious plans for growth across the group and especially in the UK where it does seem to be lagging markedly behind Tui?
The debt level at Thomas Cook, though much lower, is still a drag on the business moving forward and investors will be watching eagle eyed for evidence that Cook feels and behaves like one business – sharing costs and revenue ideas across an omni-channel distribution platform.
On that note one can’t help but cheer the group’s new brand – I can’t say that any investors I talked to had any strong view about the Nordic pioneered heart but it should help improve customer brand awareness.
Also the group’s new eight point vision for customer touchpoints (how many was it for Google?) gives the impression that Thomas Cook is trying really very hard to embed some important ideas into its business practice.
The need for the customer follow-up after a holiday and the importance of encouraging customers to share their experiences online and via mobile are to the fore.
This is all good positive touchy feely stuff which will make investors think that Thomas Cook is behaving less like a federation of businesses and more like a living, breathing global brand.
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