Chief executive Simon Cooper said the OTA is benefitting from growth in more premium, long-haul and B2B sectors and from having fewer OTA and tour operator competitors in a sector that remains heavily reliant on UK beach favourite Spain
On The Beach positioned to benefit from opportunities in the post-pandemic holiday market
The premium package holiday sector is driving the post-pandemic recovery for On The Beach as the value end of the market continues to experience a sluggish rebound.
However, after Spain further relaxed its travel restrictions last week, summer package bookings are expected to see a revival as the peak travel period nears.
In a six-moth trading update this week, the OTA said it is well placed to capitalise on structural changes in the online travel market.
Monthly booking volumes are back above 2019 levels at £385.8m compared to £365.4m in the same period in 2019, although revenue and gross profit remained behind.
However, five-star holidays saw a marked rebound in the 10 weeks to March 31, up 150% on 2019, while three-star sales were down 10%.
On The Beach says it is benefitting from having fewer big OTA competitors and tour operator consolidation following the pre-pandemic collapse of Thomas Cook.
Simon Cooper, chief executive, said: “We spent the first 10 years of our existence trying to win share of the OTA market to the point where there are just two left, ourselves and loveholidays.
“At one point there were many and, similarly, there were many tour operators and now we are left with a small handful – Tui, Jet2 and now EasyJet holidays.
“We always thought, coming out of the pandemic and particularly after the disappearance of Thomas Cook, that to win share would require a slight repositioning of brand and proposition.
“And the fact it was likely the more premium market was going to recover with greater speed than value end launching a proposition that was differentiated, gave people some value add has been fundamental.
“The 150% growth in in essentially £750 per person holidays is right in the heartland of Tui, EasyJet Holidays and Jet2.
“That's not to say they can't grow also because, of course, Thomas Cook's demise took a provider out of market that was taking two and a half million passengers away.”
Cooper said it is “fantastic” seeing the ending travel restrictions to Spain which remains crucial for a part of the market that is so reliant on the destination.
“One shouldn't forget how important Spain and Spanish destinations are to this market, whether that's the value or premium end,” he said.
“The Costas might only make up 15% of the package holiday market but then when you add the Balearics with another 15%, and Canaries with another 20%, you are talking about more than 50% of this market.
“And those that don't own and operate capacity probably have a greater reliance on Spain and Spanish destinations than those that do, because if you're a tour operator you moved your capacity away from Spain to avoid the low cost carriers.
On The Beach believes that the sluggishness in the value and of the market reflects ongoing concerns about COVID, the war in Ukraine and the cost of living crisis which is prompting people to book late.
The OTA estimates there is a substantial part of the market it is not able to compete for because they are “captured” having been issued with Refund Credit Notes by their travel provider during the pandemic and will spend those this year.
“If we're being honest, and I'm not trying to pick on any names, but the bigger you are you're likely to have a higher proportion of vouchers in market.
“The average Tui customer was spending upwards of £750 per person, so I don't think that's particularly the value end of the market.
“The suppression at the value end of the market is because it taking time for confidence to return post pandemic and you've got cost of living squeeze, the caution over Ukraine and lots of other impacts.
“The performance in the premium sector is up against the backdrop of 30% of bookings in market were already captured and yet we're still at 150% up
“I don't think you've got many people fighting for share in the value end. Jet2 goes further down into that segment than Tui does and EasyJet Holidays is trying to sell the nation's favourite hotels and that tends to be more premium product.
“In the value and of the market any kind of sluggishness in sales is not because of a lost share, it’s simply because that market has not yet booked.”
In its latest marketing push On The Beach has invested over £5 million offering all customers a fast-track airport experience, and add-on lounge access and other premium perks.
“What we intend to do, as we go into the summer, is bring back some of those perks with a longer lead time and also build out a wider portfolio of perks recognising they are very difficult for others to replicate.
“They require investment but they're likely to engender longer term loyalty. It's all about value. It's not necessarily just about how low cost the holiday is. It's about how good my holiday experience will be for the money I'm spending.
“It wasn't until mid-January that restrictions eased and given the number of false starts we'd had there was no doubt it would take until February March for customer confidence to reset to the point where people were happy to book a forward holiday.
“By this time you'd already got Ukraine and cost of living has been fairly rampant, the inflation figures were four, five or six percent pre-Christmas and they were getting worse so people were already feeling the pinch.
“We do expect cost of living to play through for some time. Any consumer facing businesses are exposed to that.
“What’s more interesting from our perspective is we've been able to expand away from our heartland, which was the more value end of the short-haul beach online, and we're moving to value premium, but we're also moving to B2B, and we're moving to long-haul.
“And all of those things give us an opportunity to out-trade historic even in a suppressed environment.”