p16-17 city oct10 7/10/08 19:20 Page 16
City & finance
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Speculation is rife that the bed bank sector is about to see more consolidation. Lucy Huxley,
Tricia Holly Davis and Chris Gray assess the pressures on the profits of the main companies
Big two
ACCOMMODATION-ONLY.
predicted
to swoop
on sector
Bed banks under p
FURTHER consolidation is expected in the bed BED BANKS’ already slim margins are coming boost in volumes for 2007 over the previous year
bank sector, with one of the big two tipped to under increasing pressure as flight capacity and profits of £336,000. Gross commissions for
make the first move. shrinks, air fares rise and the economic down- the year totalled £7.4m.
Observers believe Thomas Cook and Tui are turn starts to bite. In the last financial year, which ended October
under significant price pressure from the accom- Some believe margins in the sector may have 31, 2007, the group said it recorded an £8.5m
modation-only players, whose lower overheads nearly halved year on year, sparking speculation turnover, up from £6.4m in 2006, while profits
mean they can afford to aggressively discount. that some companies could be ripe for takeover. grew from £2.4m to £3.5m last year.
“The big two are claiming their margins are The financial squeeze has tightened its grip in Hotels4U, which was sold to Thomas Cook in
going to improve because they have cut capacity the wake of the collapse of XL and the loss of February this year, ended the 12 months to the
this year, but that’s only in the short term. They XL Airways flights, so bed end of October 2007 with a
are being hammered on price by the bed banks banks are trying to entice
“Bed banks
pre-tax loss of £270,600 on
for next summer and are under enormous travellers with new deals
pressure now,” said one expert. and destinations, and inking
focusing on the
a turnover of £4.8m. That
compared with a £1.7m
Sources believe one of the big two is poised to partnerships with operators
beach market
profit on turnover of £3.4m
swoop, with Thomas Cook hotly tipped to snap and agency groups.
up Medhotels from lastminute.com. The most recent accounts
are going to have
in the year to October 2006.
Hotels4U sales and mar-
Tui already owns the largest accommodation- for some of the key players
to fight harder”
keting director John Harding
only business, Hotelbeds.com, and is thought in the sector show a mixed argued the company was in
unlikely to want to take on another company. picture, with some reporting a loss or declining a strong position, securing good pricing deals
On Holiday Group chief executive Steve profits but others showing a profit more than and expanding into new territories to offer a
Endacott agreed that the bed banks were able to double the previous year. wider choice to agents.
put the big two under pressure. Medhotels, which is the subject of much The company has recently returned as a sup-
“Historically, the overheads on a traditional speculation about a takeover, has not reported plier to the Advantage consortium and Harding
package are £23.50 per person. At On Holiday results since the 15 months to December 2006 claimed similar deals were “in the pipeline”. It
Group, it is £6.25 – a huge difference,” he said. when it made a pre-tax profit of £6.8 million on has expanded its Africa offering, adding 13 hotels
“Although our margins are lower, our operating a turnover of £15 million. in Egypt and preparing to start featuring Gambia.
costs are far lower. We can survive on much More recent postings from other bed banks Youtravel also finished the year to October
lower prices than the traditional operators.” appear healthy. Lowcostbeds reported pre-tax 2007 with a loss of £907,000 (TTG October 3).
HotelConnect commercial manager Ian profits for the year to October 2007 of £308,400 One market observer claimed Youtravel had
Ackland said consolidation in the sector was on turnover of £5.5m, compared with £141,600 followed a strategy of expanding market
“inevitable” after the collapse of XL took two on turnover of £3.8m the previous year. share “at any price”, but the company claimed
million flight seats out of the market. On Holiday Group’s bed bank reported a 42% the losses were the result of high set-up costs.
16 10.10.2008
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