Thomas Cook filed for bankruptcy on Monday. Analysts were quick to point out the advantages to cruise operators and TUI. In fact, TUI gained 14% over Monday and Tuesday. Though Thomas Cook offers a different product than Booking Holdings (BKNG), it is nevertheless a sensible step to also look at the upside for OTAs, or online travel agencies.
UK-based Thomas Cook is a traditional travel agency, which relies in part on physical stores for travel sales, which are often package deals. Analysts correctly observe that the overlap between TUI and Thomas Cook is significant in terms of the package deal product, (geographic) customer base, and destinations. Also, a hypothetical "switch" of a quarter of TC customers to TUI would benefit the latter much more in relative terms (+14%) than the same share of TC revenue going to Booking (+3.4%). This difference is further amplified by the fact that a third of Thomas Cook's revenue was made by its airline, while Booking Holdings is mostly about accommodation. However, we must consider the chart below and think about the dynamics for a moment.
Booking.com has been growing at an extremely rapid pace over the past 10 years while traditional travel agencies like TUI and Thomas Cook have struggled to remain stable. The collapse of Thomas Cook will allow TUI to remain healthy for a longer time by an increase in customers and probably margins too, but the future is undeniably online. Thomas Cook has given reasons for the slow market too, such as a hot summer in 2018 which made many people stay at home. However, given the average number of British holidays abroad has been strong in 2017 and 2018, it should be an important tailwind too, as the figure below shows. Another reason quoted often is Brexit (the vote was in June 2016), but we observe an increase instead of a decrease in holidays abroad in the two years following the vote. Besides, Thomas Cook also offers non-EU destinations in the Mediterranean, such as Turkey.
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