On The Beach slumps after it pulls summer holiday sales

Shares in online short haul beach holidays specialist On The Beach (OTB) sank 11% to 383.5p on Thursday after announcing the surprising decision to halt holiday sales through to the end of August.

The board said its decision was based on consumer feedback from research and sales data that indicated a widespread lack of appetite for booking amber destinations.

Under the government’s traffic light system passengers travelling to amber list countries will need to self-isolate for 10 days on their return and take PCR tests on day two and day eight and an option to take an additional ‘test to release’ after five days, adding significant costs for families.’

The company was concerned that the possibility of re-arranging or cancelling flights due to the changing status of some countries would lead to the loss of customer goodwill.

SHOW OF STRENGTH

Chief executive Simon Cooper commented, ‘there is too much uncertainty for us to take new bookings with confidence that they will go ahead, or for us to know the potential inconvenience and incremental costs of taking holidays to either current Green or Amber destinations.’

In an apparent dig at its more financially challenged peers, Cooper continued, ‘unlike many of our competitors, we have no interest in selling holidays that are unlikely to happen, as our business model enables us to put customers first, rather than needing to get cash in the door to contribute to high fixed costs, and offering refunds in the form of a voucher when holidays get cancelled.’

– Travel firms face another cash call if summer is a flop

Becky Lane, airline analyst at Jefferies said the decision appeared sensible, commenting ‘robust balance sheet and liquidity enable OTB to make this decision.’ Peer TUI (TUI) is not offering refunds for ‘amber’ destinations.

The decision could still backfire if trends in falling infection rates result in popular tourist hotspots being reclassified as green countries, as Greece has done recently.

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Issue Date: 13 May 2021    


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