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On The Beach warns of “significant” drop in European holiday demand

A small reduction in deman seen in early February has “accelerated significantly” since reports of the increase in cases of the virus around Europe since last week

On the Beach Group -

On The Beach Group PLC (LSE:OTB) has warned that profits are likely to be below expectation this year because of the effect of coronavirus on holiday bookings.

The online travel agent, which specialises in beach holidays, said it initially saw a “small but noticeable reduction in demand” for travel in the coming summer in early February. 

This reduction has “accelerated significantly” since reports of the increase in cases of the virus around Europe, with Italy in particular reporting a major increase towards the end of last week.

The spread of the virus to Tenerife has particularly hit demand for holidays there, OnTheBeach said.

Earlier this month the company said it was upping its marketing spending and was offering more discounts to grab market share as it looked to grab the “unprecedented opportunity” left by the collapse of Thomas Cook.

Spending on marketing has now been reduced, the company said, but it does not now expect to achieve “payback” in the current financial year as previously trumpeted.

Now feeing that the spread of Covid-19 is going to cause “significant disruption for a period of time”, management said it now believes results for the year to 30 September 2020 will be below current market expectations.

On The Beach joins most of its travel sector peers in being hit by concerns over the flu-like virus, with easyJet (LON:EZJ) saying on Friday that it will cancel some of its European flights, particularly those to and from Italy, and warning of slower demand across the continent.

Also on Friday, British Airways owner IAG (LON:IAG) felt it was too early to forecast 2020 profits because of coronavirus disruption.

TUI (LON:TUI) shares have been hit as its four-star hotel in Tenerife was put on lock-down after confirmation of a coronavirus case.

Carnival (LON:CCL) had to suspend activities at ports in China resulting in the cancellation of voyages in other parts of Asia and said these are set to have a “material impact” on results for the year to November.

Quick facts: On the Beach Group

Price: 192.8 GBX

LSE:OTB
Market: LSE
Market Cap: £252.99 m
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