Falling value of sterling will hit beach holiday group’s performance

The slump in sterling will hit Manchester-based beach holiday specialist On the Beach Group, it warned in a trading update today.

It said it anticipates delivering a full-year performance below the board’s expectations.

The group explained: “On the Beach operates a flexible model incorporating dynamic, rather than currency-hedged, pricing for the packages that it provides its customers.

“With the increased likelihood of a no deal Brexit, sterling has significantly devalued against the euro since the beginning of May and this accelerated at the end of July, continuing into August.

“Whilst the group has seen a strengthening of demand in H2, this weakening of sterling leads to a significant increase in On The Beach prices versus full risk competitors with currency hedges.

“As On The Beach remains focused on profitable growth, these relative price increases make it difficult for the group to gain share of market while maintaining margins.”

Updating the market on current trading, the company said that, despite the difficult market conditions in 2019, the group has continued to increase investment in both talent and infrastructure in the areas that it believe offer the most significant expansion opportunities.

The company said that, as a result, it has made excellent progress towards delivering its strategy, which includes:

• Following the head office move into Manchester in November 2018, to underpin the objective to recruit and retain the very best digital talent, On the Beach has accelerated the pace at which it is adding digital headcount to its teams. It has also reorganised the technology and product functions to allow it to better scale and increase the pace at which it evolves its platform to support strategic objectives.
• The firm acquired Classic Collection Holidays in August 2018 to support the objective to offer its competitively priced beach holidays to a wide range of intermediaries through an online portal. Classic Package Holidays was launched at the end of March 2019 and is now live with more than 1,000 agents. The group expect that by the end of FY19, more than 1,500 agents will be using the platform and is confident that this new channel will deliver a meaningful contribution to group performance in FY20.
• It continues to directly integrate scheduled long haul carriers into its platform. British Airways and Emirates are live on site and further integrations will be completed imminently. The group will enter FY20 with all key airline partners integrated while it continues to build its portfolio of directly contracted hotels. In FY19 it has grown long haul revenues by more than 100% and is excited about the medium term opportunities that these new destinations offer.
• International platforms will deliver significant revenue growth in H2 FY19 with a substantial improvement in marketing efficiencies and, therefore, a reduced EBITDA loss.
• On the Beach continues to actively explore acquisition opportunities and is delighted that Adam Hansen will join the group later in August from Rothschild as corporate development director.

Chief executive Simon Cooper said: “In what is a difficult general economic climate, we remain confident in the resilience and flexibility of our business model, focusing on profitable growth and an ability to capitalise on any structural changes in the market.

“In FY19 we have invested significantly in our infrastructure, talent and technology to ensure that we build strong foundations to support our strategic objectives.”