Summer trading was in line with expectations with demand once again picking up in terrorism affected countries
Update suggests falling real incomes are not putting people off booking holidays
The Share Centre prefers TUI in the sector but believes investors should not dismiss Thomas Cook indefinitely
As Thomas Cook updates the market Helal Miah, investment research analyst at The Share Centre, explains what it means for investors:
"The pre-close trading update from Thomas Cook released to the market this morning could go some way in boosting confidence within the travel and tourism sector. The group reported that summer trading was in-line with expectations, with bookings up by 11% across all regions and 91% of capacity sold. Trips to Greece, Bulgaria and Cyprus were particularly popular and investors should be encouraged by demand once again picking up in terrorism affected countries such as Turkey and Egypt where there are bargains on offer. Long haul destinations to America also proved popular although the current hurricane season has naturally presented operational challenges in the last month.
"The group's update does not seem to suggest that consumers were putting off their holidays in the face of falling real incomes and, looking ahead, consumers are still making bookings as winter bookings are up 6%. Consumers, it seems, will not miss out on holidays, and they cannot forego food spending so the pressure is falling on the general retail sector, and we have seen poor numbers from those companies.
"We believe that the group's numbers should be a positive reflection for the sector and TUI, which is our preferred stock. We do not have a formal recommendation on Thomas Cook but its share price performance has been similar to that of TUI, and therefore we believe investors should not dismiss looking at Thomas Cook. If we have a period of relative calm in terrorism affected regions then confidence amongst travellers should continue to rise and help mitigate the competition issues faced in Spain."