Bosses of the leading UK OTA remain optimistic about prospects for the travel sector next year after reporting a return to profit in the 12 months to September 30
Less gloomy economic outlook could mean 'remarkable' 2023, says On The Beach
Travel could be in for a “remarkably strong” 2023 if some of the more optimistic forecasts about the economy prove to be accurate, On The Beach bosses believe.
Chiefs of the leading OTA gave their views on prospects for next year as the holiday retailer revealed it had returned to profit in a full-year trading update covering the period to September 30.
This week, speaking at the launch of Travel Weekly’s annual Insight Report, Deloitte senior economist Debrapratim De gave a more upbeat assessment of the UK economy than many other analysts.
He predicted the looming recession will not be as bad for consumer spending as the last two with inflation coming down next year from a peak of 12% to average 4% and interest rates not expected to rise above 4%.
Simon Cooper, founder and chief executive, who announced plans to step aside in the next 12 months as chief financial officer Shaon Morton takes the helm, told Travolution that he’s an “eternal optimist”.
“We are not hearing anything counter to that from the analysts and banks that we speak to. Holidays do tend to run on forward looking consumer sentiment. I think people are looking at what they think their personal finances will be like in three, six, nine, 12 months.
“If that tipping point comes sooner, we can see a remarkably strong 2023. I suppose there is disagreement across those that commentate on this about the exact time when this tipping point will come, but it will come.”
Cooper said it is clear that the cost-of-living crisis is having a “differential effect” depending on the market segment and OTB is seeing healthy early bookings in the more premium, long-haul and B2B sectors.
He said comparisons with previous years are difficult because travel has not had a normal year of trading since before the pandemic so it remains to be seen if COVID has changed buying behaviours or we will see the traditional early year peaks from January.
“What we have seen is great strength in the earlies and great strength in the lates. It’s the in-betweens which have proven weaker,” Cooper said.
Morton said On The Beach will be kicking off its mainstream TV peaks advertising push the week before Christmas, building on the OTA’s ‘It’s The Most Wonderful Time of the Year’ campaign launched last Christmas.
Sponsorship of Magic Radio’s Breakfast Show presented by Ronan Keating and Harriett Scott, a first for the brand on radio, has already had a positive impact on brand awareness, added Morton.
He said On The Beach will invest in performance advertising on digital platforms, but intends to continue building brand awareness. “You have to do both, but what we are trying to do is move the dial to get more of that branded traffic by having more brand awareness so that it’s cheaper to acquire customers.”
Although On the Beach is moving more onto upmarket and long-haul, it remains “over-indexed” in the core three-star short-haul summer sun market compared to competitors.
But Horton said there was “more than enough headroom” in the higher value, more premium sector for On The Beach to cover any potential softening in the three-star sector.
On The Beach saw higher Total Transaction Value (TTV) growth for holidays departing in the summer (19%) in 2022 than in the 12 month period (11%) but extended seasons in destinations like Turkey and long-haul are helping to broaden its appeal from its summer mainstay. Winter trading remains less certain than summer.
B2B growth is expected this year through OTB’s Classic Collection division, which recently appointed experienced industry executive Andy Freeth as chief executive, now that most COVID refund vouchers have been traded in.
In 2022, trade partners are thought to have been particularly impacted by a “captured audience” of holidaymakers that had refund vouchers they could only spend with the holiday company they originally booked with.
Cooper said On The Beach has been finding it “a lot easier” to claim refunds for customers more quickly from most airlines for cancelled flights during the summer disruption when carrier struggled to get back up to capacity.
But he said: “There are a small number taking longer than I would like to get our money back from and there’s clearly one airline where the only way to do that is the legal route.”
On The Beach is continuing to pursue Ryanair in the courts for £2.3 million it claims it is owed for refunds it has already paid to customer due to the COVID pandemic.
Cooper said the case is progressing “reasonably well” despite going “more slowly than we would like” and a decision is expected next summer, although is likely to be appealed whatever way it goes.
A second separate High Court case under which OTB is seeking damages from the budget carrier claiming it is abusing its dominant position is also ongoing but will take longer to conclude.