Articles
Brochure Printing Equals Money Printing
In the last year where full year financial results are available, the two travel giants, Thomas Cook and Tui Travels reported healthy profits, contrary to market expectations. Financial experts had predicted major losses for all package sun holiday companies. The consensus was that, a large number of the British sun seekers would forgo the balmy Med and sangria for a traditional seaside break at home, or alternatively, building their own package online by buying cheap flights and accommodation separately.
While this was true to an extent, there was indeed a significant downturn in package holidays; many chose to stick to with the tried and trusted all-in-one deal. For people who went for the package deal earlier this year, when the ash cloud shut down European air travel, this would have been a fortuitous choice as they had to be accommodated and catered for. This will, naturally, have a huge impact on 2010 profits for airlines.
One thing, above all others, that allowed Thomas Cook and Tui Travels to come up shining, was the fact that, back in 2007, the both merged with other large travel companies. In the case of Thomas Cook it was MyTravel, while for Tui Travels it was First Choice. This provided these travel companies with an enormous amount of clout, with everything from charter airlines to holiday brochure printing companies.
The market analysts at Thomas Cook and Tui Travels could see the downturn coming and both of these companies set about addressing damage limitation. The tactics they employed were identical. Of course there was the normal restructuring and streamlining of the subsidiaries but, in addition to that, Thomas Cook and Tui Travels cut their holiday capacity in line with where they saw the market being. In the case of Thomas Cook, the reduction in the number of sun holidays on offer was just under ten per cent.
Another effect of the economic downturn was that some of the smaller travel companies collapsed, bad news for the brochure printing companies who held their contracts, but great for the travel companies still standing, since it meant a greater market share available to be snapped up. One side effect of reduced competition is more monopoly, which comes with increased prices, something both of these companies embraced. Thomas Cook’s prices rose by around seven point nine percent, with Tui Travels prices increasing by just under ten percent.
The net result of this was that the profits for Thomas Cook remained stable at 308 million while Tui Travels overall profits rose by fifteen percent. Wonderful news for shareholders, since dividends increased by ten percent at both companies.