Package holiday firm On The Beach has insisted the demise of Thomas Cook will boost trading despite seeing annual profits plunge after taking a hit from the firm’s collapse.
On The Beach posted a 26% fall in annual pre-tax profits to £19.4 million after booking a £7.7 million charge from the collapse of rival Thomas Cook.
Around 15% of the company’s customers booked Thomas Cook flights annually, and On The Beach was forced to re-book affected customers on to alternative flights.
But On the Beach said the demise of the competitor will offer “unprecedented opportunity” to boost its market share.
It said it had already seen strong search demand from holidaymakers since the Thomas Cook collapse in September.
But it added some holidaymakers are being put off by price hikes caused by the sudden loss of flight availability after Thomas Cook’s failure, which is affecting holidays for this winter and eastern Mediterranean destinations in particular.
It expects bookings to pick up after Christmas and as flight availability recovers during 2019-20.
On The Beach said with the Thomas Cook impact stripped out, underlying pre-tax profits lifted 3% to £34.6 million over the 12 months to September 30.
Simon Cooper, chief executive of On the Beach, said: “The failure of Thomas Cook Group has led to a material shift in market dynamics as it had a 20% share of beach holiday passengers and approximately 20% of the seat capacity to beach holiday destinations.
“This has created a significant short-term lack of seat capacity as well as an unprecedented opportunity in the medium term to gain share.”
The group is hoping to secure at least a fifth of the market share previously held by Thomas Cook.
It has ramped up spending on marketing in a traditionally quieter time of year to capitalise on the opportunity, with advertising across radio, press and television.
But it is expecting a drop off in holiday searches in the days around the December 12 general election as the nation goes to the polls.
The results come after On The Beach warned on profits earlier in the year as political uncertainty dented consumer confidence and the value of the pound, which makes holidays abroad more expensive.
Shares in the company plunged in August after the alert, but have since recovered as investors have eyed a growth opportunity on the back of the collapse of Thomas Cook.
Russ Mould, investment director at AJ Bell, cautioned that On the Beach will have to spend heavily on marketing amid intense competition from rivals also looking to scoop up customers in the wake of Thomas Cook.
He said: “The key measures of success will be the time it takes to make a return on this investment and whether it can hold on to any new customers beyond a single holiday booking.”