Travel companies look overseas
Sunday 24 May 1998
Both acquisitions highlight the race between UK travel companies for a bigger share of the international market. German companies, such as TUI, have long expanded across frontiers, but only now are UK operators catching up.
Airtours and Thomson Travel Group already account for about 65 per cent of Scandinavian package tour sales. Manchester-based Airtours' 29 per cent stake in Frosch, and option to buy the remainder, now puts it ahead of its newly listed rival in Europe's largest economy. UK companies "have realised they can't stay in their own markets, and can apply their skills elsewhere," said Nigel Hicks, an analyst at Credit Suisse First Boston.
Europe's travel industry is growing at a rate of about 4 per cent a year, with some parts, like the cruise industry, growing considerably faster. Still, the UK is a mature market where earnings can suddenly slump when companies are forced to sell off excess capacity cheaply.
William Barney, a director in KPMG's consultancy division, said: "The UK market can sometimes find itself overbought and ... the availability of capital makes [overseas] acquisitions possible."
Airtours, the largest tour operator, operates in the UK, France, Scandinavia, Belgium, Holland, Canada, the United States, and Italy. Market leader, Thomson Travel, trades from Ireland and Scandinavia, where in February it acquired package tour operator Fritidsresor. "Medium-term, we'll be looking at acquisition in the UK, Benelux, and Switzerland - and at UK self-catering holidays," said Paul Brett, Thomson Travel chief executive.
British companies could well take a bigger slice of the European pie because the largest are "vertically integrated", owning or controlling travel agents and charter airlines as well as tour operators. The top five, which also include First Choice, Thomas Cook Ltd, and Carlson Leisure Group (UK) Ltd, the British subsidiary of US-based Carlson Companies, account for more than 70 per cent of package holidays, according to market research group Mintel.
Tough price competition in Germany and other European markets is weighing on smaller companies and forcing consolidation, highlighted by the recent merger of Deutsche Lufthansa's charter airline with Karstadt's package tour unit to create C&N Touristic. "We expect consolidation, greater cross border co- operation and vertical integration," said Renata Drinkwater, a partner in the hospitality and leisure unit of Ernst & Young.
UK companies are not the only ones vying for European dominance. Switzerland's largest travel company, Kuoni Reisen AG, for instance, is thought to be looking at further opportunities in Germany after its purchase of Euro- Lloyd Reisebuero travel agency from C&N. And operators like C&N and TUI will almost certainly expand outside Germany or forge partnerships to boost earnings at home.
But British horizons extend beyond Europe. Airtours is tipped to expand in the US, and this week First Choice acquired the tour operating unit of Royal Aviation in Canada for pounds 1m.
The North American market is more problematic than Europe, however, tending to be dominated by scheduled airlines with shorter breaks. Analysts don't rule out mergers and acquisitions between UK companies.
"In the UK the market has been fairly steady," said Bruce Jones, an analyst at Merrill Lynch. "But there must be questions about what will happen to Thomas Cook and whether Carlson will keep Inspirations."
- 1 Sabrina Corgatelli: US hunting tourist posts picture of herself with dead giraffe after Cecil the lion outrage
- 2 Tom Cruise: Reporters banned from asking actor about Scientology
- 3 A-level results 2015: UK exam board OCR admits it 'estimates' hundreds of pupils' grades after papers 'go missing'
- 4 Dutch King Willem-Alexander declares the end of the welfare state
- 5 Giant Minion terrorises drivers in Ireland as 40ft inflatable blocks traffic on Dublin road
Edward Heath 'raped 12 year-old boy at Mayfair flat'
Sabrina Corgatelli: US hunting tourist posts picture of herself with dead giraffe after Cecil the lion outrage
'Gene drive': Scientists sound alarm over supercharged GM organisms which could spread in the wild and cause environmental disasters
Labour leadership race: Jeremy Corbyn could be the next Prime Minister, says Ken Clarke
Tom Cruise: Reporters banned from asking actor about Scientology
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
Chris Leslie: Jeremy Corbyn's anti-austerity agenda will harm the poor, says Labour shadow Chancellor
Landlords renting properties to illegal immigrants to face up to five years in prison
While we fixate on Calais, the Home Office is quietly deporting dozens of migrants on 'ghost flights'
Calais crisis: The seven claims made about the migrants - and the reality
iJobs Money & Business
£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...
£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...
£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...
Up to 70k DOE: Guru Careers: We are seeking an experienced Financial Director ...