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Thomas Cook Tourists Turn to Bulgaria as Terror Shift Widens

  • Smaller holiday destinations may hold key to spurring bookings
  • Stock drops the most in seven months on flat quarterly loss

European tourists are embracing lesser-known destinations as a terrorism spree prompts people to avoid established markets such as Turkey and the French Riviera where attacks have occurred, according to Thomas Cook Group Plc, the world’s oldest holiday company.

Countries including Bulgaria, Croatia, Cyprus and Portugal are reaping some of the fastest growth in bookings for next summer, Thomas Cook said Thursday. Greece posted a 40 percent jump in sales, while a surge in travel to Spain’s Balearic and Canary Islands has begun to ease. The islands were among the chief beneficiaries last year as travel companies sought terror-free locations.

By adding new destinations and boosting capacity at resorts perceived as safer by travelers, Thomas Cook aims to cut losses that pushed shares down the most in seven months. While initial moves by tour operators including Thomas Cook and TUI AG to counter the impact of terror attacks focused on areas such as Spain and Italy, a shortage of spare rooms has compelled companies to turn to less saturated markets.

“Spain is still a very popular destination, but we see after a very strong year last year that bed capacity didn’t increase overall,” Chief Executive Officer Peter Fankhauser said on a conference call. “In the smaller destinations like Croatia, like Bulgaria, like Cyprus, we are very well positioned and we see very good growth there.”

Egypt, Morocco

Overall bookings for next summer are up 9 percent on this time last year, with prices stable and 31 percent of the program sold, an increase of 2 percentage points, Thomas Cook said. The London-based company’s increased offering in Greece has more than compensated for continuing declines in Turkey, while demand for holidays in Egypt and Morocco is edging back up after slumping in the wake of a 2015 massacre at a Tunisian hotel and the suspected bombing of a jet departing the Sinai resort of Sharm el-Sheik.

Fankhauser said that he hasn’t given up on Turkey, with indications that the decline in demand is beginning to level off and there’s a possibility of a late surge in bookings because of low prices.

Thomas Cook reported an underlying loss before interest and tax of 49 million pounds ($62 million) for the fiscal first quarter ended Dec. 31, unchanged from a year earlier, on sales that rose 14 percent to 1.62 billion pounds. The company said that while it’s on track to deliver a full-year operating profit in line with analyst forecasts, it “remains cautious” given an uncertain political and economic outlook.

While summer sales in northern and continental Europe are well ahead of last year, U.K. demand may be moderating, with bookings up 1 percent and package holiday reservations “slightly behind.” Thomas Cook is also wrestling with losses at its Condor unit in Germany, hurt by a glut in airline capacity and the collapse of Turkish travel, though a recovery is forecast for the second half.

“The basic business model continues to face structural challenges,” Wyn Ellis, an analyst at London-based Numis Securities Limited, said in a note, downgrading the stock to “reduce” from “hold.”

Shares of Thomas Cook fell as much as 10.3 percent, the biggest drop since June 24 last year, and traded 8.8 percent lower at 84 pence as of 1:19 p.m. in London.

— With assistance by James Cone

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