It was a challenging summer for a plethora of UK-listed travel and leisure companies. Some hotels were forced to temporarily close due to hurricanes that hit parts of the US and Caribbean, and are now facing the clean-up process. Ryanair (RYA) made headlines with its flight cancellations after not properly planning holidays for its pilots. Some would-be travellers may have put off their holiday all together on fears of terrorism both at home and abroad.
Things were tough for Merlin Entertainments (MERL) when it was forced to close Legoland Florida for three days when Hurricane Irma hit the south-eastern US. The storm may be over, but fewer visitors are heading to the park as local residents focus on cleaning up the aftermath. However, Merlin's management is not too concerned about the impact of the storm at group level, since growth at constant currency for its Legoland parks was up by 16 per cent in the first three quarters.
Meanwhile, Tui (TUI) revealed it will likely have to temporarily close some of its hotels in the Caribbean for repairs, while demand for some locations there and in Florida has been noticeably weaker going into the winter period. Despite repairs and having to rebook some customers to other destinations, underlying cash profits are still expected to grow by around 10 per cent for the current financial year. Similarly, management at Thomas Cook (TCG) said September was a challenging month with thousands of customers affected by Hurricane Irma, but did not quantify the impact.
However, there was some good news for some of the sector's listed companies. Analysts have voiced concern this year that increasing capacity in the sector, prompted by lower fuel costs, could soon put pressure on yields. However, the collapse of Monarch at the start of October should alleviate some of that pressure.
Reduced capacity in the European airline industry would be a good thing for easyJet (EZY) and Ryanair. The latter improved its load factor in September by 2 per cent to 98 per cent year on year. Traffic was also up 10 per cent to 11.8m customers. That was despite the budget airline cancelling 2,100 flights in September and October, due to issues with the timing of its pilot’s vacation days. This winter Ryanair will fly 25 fewer planes to make sure that all future scheduling conflicts are avoided.
Recent terrorist attacks in the UK and mainland Europe have made travellers nervous about planning a holiday. Merlin reported that like-for-like revenue during the first three quarters has been flat on last year due to a tough summer season, with fewer visitors to its midway London and European theme parks on terror fears. Management noticed an immediate drop off in domestic visitation after the Westminster Bridge attack, with demand further dampened by subsequent attacks. Similarly, On The Beach (OTB) reported some softness after the terrorist incident in Barcelona.
This contrasts with InterContinental Hotels (IHG), which stated in a third-quarter update that destinations previously hurt by terrorism had recovered. Revenue per available room in France improved by 6 per cent during the third quarter, with double-digit growth in Turkey and Belgium. Management at Whitbread (WTB) also said that there had been no impact from terrorism on bookings for Premier Inn.
