Thomas Cook, Fosun Aim New Travel Venture at Wealthy Chinese

Updated on
  • U.K. tour operator targets ‘affluent, adventurous’ vacationers
  • Fosun-backed acquisition fund still targeting up to 50 hotels

Thomas Cook Group Plc, Europe’s second-biggest tour operator, set up a high-end Chinese travel agency with minority shareholder Fosun International Ltd. in a bid to capture a more lucrative slice of China’s booming vacation market.

The agency will sell overseas holidays to the wealthiest 20 percent of Chinese travelers, and guide them beyond Europe’s obvious destinations, aiming to make China a “substantial” part of Thomas Cook’s business, Chief Executive Officer Peter Fankhauser said in an interview in Shanghai.

The companies are betting that China’s outbound tourism market -- the largest in the world -- can help drive growth in Europe, where travel has been depressed by recent terror attacks and the U.K.’s vote to leave the European Union. Fosun, a unit of a Shanghai-based conglomerate backed by billionaire Guo Guangchang, said it expects the number of Chinese traveling outside the country to grow by as much as 20 percent annually.

Thomas Cook shares rose 6.1 percent Thursday in London trading to the highest level in more than three months before dipping as much as 2.4 percent Friday. The stock has declined 37 percent this year, shrinking the company’s market value to about 1.2 billion pounds ($1.6 billion).

Fosun, which owns 8.2 percent of Thomas Cook, will use its resources globally to support the tour operator’s online travel services and other areas, Fosun International CEO Liang Xinjun said at an event in Shanghai to announce the agreement.

Affluent, Adventurous

Fosun’s financial muscle may help fuel expansion plans at Thomas Cook, which has a B1 credit rating by Moody’s Investors Service, four levels below investment grade. In July, the 180 year-old company cut its earnings forecast for 2016 after a string of terror attacks across Europe depressed summer travel.

The joint-venture, catering to “affluent, adventurous, quality-oriented” Chinese travelers seeking “unique experiences,” is part of a partnership that began last year after Fosun bought a stake in Thomas Cook. At the time, the companies also announced there’d be closer ties between the London-based operator and Fosun-owned Club Mediterranee. The companies have also set up a fund -- mostly financed by Fosun -- allowing Thomas Cook to buy as many as 50 hotels.

While the hotel fund is behind schedule and hasn’t yet acquired any properties because of rising prices in Spain and uncertainty in countries including Egypt and Tunisia, it’s still in place and will focus as much as possible on acquiring resorts that cater to Chinese travelers, Fankhauser said.