Holidays to Spain could cost 10% more due to weak pound, warns Thomas Cook boss

Travel group Thomas Cook has warned the cost of holidays to popular European destinations such as Spain could become more expensive because of the weak pound.

Sterling has lost approximately 14% of its value against the euro in the 15 months since last year's Brexit referendum and Thomas Cook's chief executive Peter Fankhauser said he expected prices to increase between 5% and 10% this year.

He added Spain's popularity because of safety fears over other locations had also contributed to drive prices higher, leading to Spanish hoteliers "taking a bit of an advantage" of the situation.

"We have not enough beds for all the demand," said Fankhauser.

Away from Spain, the FTSE 250-listed company has registered a slow but steady flow of tourists returning to Egypt and Turkey, two very popular destinations which were shunned over the last 18 months in the wake of a series of terrorist attacks.

Speaking to the BBC's Today Programme, Fankhauser said both countries remained "wonderful destinations" that offered "great value for money".

In August, Thomas Cook began selling packaged holidays to Tunisia for the first time since 38 people, including 30 British tourists, were killed in an attack on a resort in Sousse in June 2015. The Foreign and Commonwealth Office, which had advised against any unnecessary visit to Tunisia following the atrocity, has since relaxed its stance on the country, allowing tour operators to resume business in the region.

Overall, strong demand for holidays in Greece, Bulgaria and Cyprus helped Thomas Cook record an 11% year-on-year rise for its summer bookings with a 1% rise in average selling prices, while booked revenue for the winter period is 6% higher than in the corresponding period last year.

As a result, the London-listed company forecast full year operating profit will fall in line with current market expectations.

Meanwhile, the tour operator unveiled plans to create a joint hotel investment platform with Swiss-based hotel property development firm LMEY Investments. The two companies have agreed to contribute five owned and directly-managed hotel properties between them, for a combined value of approximately £150m.

The partnership will be used to "develop the platform into a fund focused on acquiring a pipeline of further hotel and resort assets across Thomas Cook's destination markets", the company said in a statement on Tuesday (26 September).

As part of the deal, LMEY sold a 42% stake in German tour operator Aldiana, which operates eight club resorts across Spain, Greece, Cyprus, Tunisia and Austria to Thomas Cook.

Fankhauser added Aldiana will bolster Thomas Cook's own-branded hotel portfolio, a development which he described as "absolutely key to our success".

Laith Khalaf, senior analyst at Hargreaves Lansdown, also underlined the importance of the deal within the company's long-term strategy.

"Fankhauser has previously said he wants the travel company to walk in its customers' flip-flops, and the deal with LMEY will allow Thomas Cook to strengthen its own brand offering where it can exert greater influence over the holiday experience," he explained.

In a separate development, the company confirmed its chief financial officer Michael Healy had "decided to retire", and will step down from his role in March, when he will be replaced by Bill Scott, the current director of financial reporting.