On the Beach expects to continue to capture market share and achieve profit targets despite weaker than expected late summer holiday sales.
The online agent is benefitting from the failure of Low Cost Travel Group as consumer look to recognised brands with Atol protection.
However, the company said other external events such acts of terrorism in Turkey and the south of France, macroeconomic uncertainty and weakening of sterling against major currencies following the EU referendum was affecting consumer confidence and the travel industry in particular.
In a trading update, On the Beach said: “As previously stated, the board had anticipated a strong ‘lates’ market as summer approached.
“These factors have and continue to impact the ‘lates’ market and we now expect a weaker outcome in this segment, resulting in significantly fewer consumers travelling this year.
“Additionally the supply/demand imbalance has led to widespread discounting of seat-only and packages by some market participants, in many cases below cost, and this has driven short term share gains for those with distressed capacity.
“In the second half of the year, On the Beach has continued to take market share, whilst remaining focused on delivering profitable growth.
“We are on track to achieve cash margins in line with the board’s expectations through leveraging our flexible business model and driving efficiencies in both marketing spend and cost base, given that less than 20% of the group’s costs are fixed.”
The company added: “It is important to note that On the Beach did not sell and has no exposure to any products sourced from the Lowcost Travel Group.
“Whilst the failure of Low Cost Travel Group has been highly disruptive to consumers and to some of the group’s competitors, On the Beach has seen an immediate improvement in trading dynamics, with a higher share of market traffic, lower costs per click and improved revenue per unique visitor.
“The board believes that there will be a medium term benefit to the group as consumers look to secure their holidays from recognised brands with Atol protection.”
Chief executive Simon Cooper said: “2016 has been an extraordinary period for the travel industry and On the Beach is proving its unique strengths and attributes against the backdrop of these challenges.
“Whilst revenue growth will be below our original plans as a result of market conditions, we have continued to outperform the market, stealing significant share.
“Our focus on profitable sales and cash margins will deliver a PBT [profit before tax] outcome in line with the board’s expectations at the beginning of the financial year, which represents very strong double digit growth over last year.
“The group trades in a sector that has proven extremely resilient over the past 20 years and we remain confident in the resilience of On the Beach and the market.
“By using our scale to drive exclusivity, our technology to drive innovation and our financial strength and Atol protection to drive customer trust, we are well placed to capitalise on the structural changes in the market which will only accelerate given the unprecedented current conditions.
“Given our strengthening competitive position, the group is well placed to continue to take market share and to focus on further profitable growth, as other operators downsize risk capacity or exit the market.”