Thomas Cook grows hotel footprint amid financial challenges

The Casa Cook Chania is the company's first family-focused hotel. Photo credit: Thomas Cook

Thomas Cook's hotel portfolio has been growing in recent months, but the company's finances are showing some strain. For the first half of its fiscal year, ending March 31, the company reported a £1.4 billion pretax half-year loss.

"The first six months of this year have been characterized by an uncertain consumer environment across all our markets," Peter Fankhauser, CEO of the tourism and travel company, said in a statement. "The prolonged heatwave last summer and high prices in the Canaries reduced customer demand for winter sun, particularly in the Nordic region, while there is now little doubt that the Brexit process has led many U.K. customers to delay their holiday plans for this summer."

The company's underlying earnings before interest and taxes loss increased £65 million to £245 million, reflecting margin pressure in its tour operator vertical.

Thomas Cook's Hotels

In spite of the challenges, Fankhauser said that the company is making good progress on its differentiation strategy, especially in its plans to open beach hotels across Europe. "In the last two months alone, we’ve opened 12 new own-brand hotels out of a pipeline of 20 for 2019, reinvigorating key destinations across the [Mediterranean] with four new Cook’s Clubs and launching our first family Casa Cook in Crete."

This property is the new-build Casa Cook in Chania, Crete, the 13th new own-brand hotel that Thomas Cook has opened this year. The 104-room hotel will have a bespoke kids’ concept when it debuts. 

Other new properties include another Casa Cook in Ibiza and a Cook’s Club in El Gouna, Egypt. ​By the summer, Thomas Cook will have a portfolio of 200 hotels with an estimated 40,000 rooms across the Mediterranean, North Africa, the Middle East and Asia.

At the same time, the company is taking steps to improve the financial returns from its hotel business by signing four new management contracts, taking the total to 24. Fees earned through management contracts are, on average, double those earned through franchise contracts.

The company also reported "good momentum" in its hotel fund joint venture. One year on from launch, the fund has almost doubled in size to number nine properties, including the Casa Cook Kos in Marmari, Greece. This growth has been fueled by the addition of a further €91 million of funding from third-party finance partners. Fund managers are in discussions about a number of further opportunities while the first new-build hotel in the joint venture will open this summer as a flagship Casa Cook in Ibiza, managed by Thomas Cook Hotels and Resorts.

Thomas Cook also has taken the next step in the development of its China joint venture with two new hotel projects in partnership with Fosun, including the first Casa Cook in Asia. "We have also secured a leading position in the Russian market with the development of a new joint venture to buy the No. 1 tour operator Biblio Globus," he said.

"As we look ahead to the remainder of the year, it’s clear that, notwithstanding our early decision to mitigate our exposure in the 'lates' market by reducing capacity, the continued competitive pressure resulting from consumer uncertainty is putting further pressure on margins," said Fankhauser. "This, combined with higher fuel and hotel costs, is creating further headwinds to our progress over the remainder of the year."