Thomas Cook has followed its deal with Expedia, Inc by announcing the creation of a hotel fund to expand its own-brand portfolio.
The comments came as TUI Group said in a trading update that it would continue to expand its own-brand estate, as the tour operators move deeper into ownership.
Thomas Cook and LMEY, a Swiss hotel development group, have entered into an agreement to work together to create a joint hotel investment platform, initially through the contribution of a minimum of five owned and directly-managed hotel properties between them, with a combined value of around GBP150m.
The platform will be developed into a fund focused on acquiring a pipeline of further hotel and resort assets across Thomas Cook’s destination markets.
Thomas Cook CEO Peter Fankhauser, said: “The development of a strong portfolio of own-brand hotels is absolutely key to our success, allowing us to provide customers with a consistent and high quality holiday, whatever their needs. Our new strategic partnership with LMEY, with its proven track record of identifying and redeveloping highly successful properties in sun and beach locations, gives us the perfect launch pad to accelerate this critical part of our strategy.”
Thomas Cook has also acquired from LMEY a 42% stake in Aldiana, a premium club and activity-focused tour operator and hotel management company based in Germany. Aldiana currently operates eight club resorts located in Spain, Greece, Cyprus, Tunisia and Austria, with plans to open another four resorts over the next two years. Following the acquisition, Aldiana will sit alongside Thomas Cook’s six existing proprietary hotel brands.
The announcement was part of a trading update from the group, at which it reported the likelihood of increased prices in Spain. Fankhauser said that bookings to Spain “our biggest destination overall, remain level with last year as we continue to manage through what has proven to be a very competitive trading environment, particularly for the UK”.
He added: “We have seen strong demand for our holidays over the summer, supported by our focus on the customer and improvements in our holiday offering, including the launch of 11 new own-brand hotels. This progress is helping to mitigate the margin pressure we have experienced as a result of a more competitive market to Spain.”
The group expects to see expects the price of Spanish holidays to rise by another 5% to 10% next year, with the CEO commenting: “We have not enough beds for all the demand”. The company has seen an increase in demand for destinations which it said offered value, in Egypt and Turkey.
Last month saw Thomas Cook sign an agreement with Expedia, Inc, which will see the tour operator add over 60,000 hotels to its offering.
The company said that the deal would “over time” provide Thomas Cook consumers with access to thousands more hotels for the company’s city and domestic holiday businesses. Thomas Cook said that the deal would provide its customers with over 60,000 more hotels in global city and European domestic locations than currently on offer, “all of which will meet Thomas Cook’s standards for quality and value, as well as health and safety. The agreement will also enable Thomas Cook to significantly reduce the cost and complexity of its city breaks and hotel-only business”.
At TUI, the company said that trading for future seasons was overall in line with expectations. The group is also pursuing its own brands and will open five new year round properties in this winter for Riu, Robinson and Blue Diamond, and will reposition further hotels under our TUI Blue brand in 2018.
September saw TUI has acquired Stella Polaris Creta, a subsidiary of the Greek Karatzis firm and owner of land on the southern coast of Ierapetra in Crete, to open a new Robinson Club.
The deal took the number of premium Robinson clubs to three in Greece. “We are aiming to deliver substantial growth in our own hotel brands TUI Blue, RIU, Robinson and Magic Life in the next few years. The expansion of our portfolio in the trending destination Greece marks a further step towards that goal,” said Sebastian Ebel, TUI Group executive board member in charge of Hotels & Resorts.
The company is due to update further on its strategy in December.
HA Perspective [by Katherine Doggrell]: As we commented last week, the pressure on markets such as Spain has meant that, if the tour operators want to maintain a presence, they have to put their money where their mouths are and buy that seaside hotel.
As Langton Capital’s Mark Brumby put it, as Thomas Cook, “there is a lot of paddling going on below the waterline”. One area where there was no comment at the trading update was the joint venture in China with Fosun, which Brumby described as “potentially very exciting”.
While there was no mention on this trading update, last month the group gave a presentation on its strategy in China, where it launched in September last year, in which it said that it would seek to leverage the Thomas Cook brand, but would also seek to target independent travellers, against tour groups. The group now has two offices open and reached c. 20,000 booked guests in FY17, with a current run rate of 1,000 outbound visitors booked per week. The ambition, it said, was to make China a sizeable market comparable, over time, with other key source markets in Europe.
Looking to 2018, the company said that it was planning to build its portfolio across nine key destinations, including the UK, Egypt and Turkey. Not, as yet, Spain, where it and TUI are spending on more than just offices.