Thomas Cook announces strategic alliance with Expedia

Thomas Cook (LON: TCG) has announced today it will partner with online travel company Expedia.

The strategic alliance means the US company will become the preferred provider of hotels for a range of Thomas Cook's city and domestic holiday packages. Expedia will also provide its booking platform to support all city break and hotel only sales across the UK travel company's European operations.

The multi-year agreement will give Thomas Cook customers 60,000 more hotel options in major cities around the world and in European domestic locations. It also allows economies of scale for Thomas Cook by reducing the cost and complexity of its city breaks and hotel-only business.

Thomas Cook's core sun and beach package holidays will now also be available on Expedia's websites.

Group CEO Peter Frankhauser commented on the alliance, saying it is...

" Helping the business take an important step forward in delivering our strategy for profitable growth. Joining forces with a company that has the global reach and expertise of Expedia will allow Thomas Cook to further simplify our systems and processes. At the same time, this will free us up to focus on holidays to our own-brand and selected partner hotels in sun & beach locations."

Expedia Brand President Aman Bhutani said it will help the US company "enhance their competitive position in Europe."

Thomas Cook is in the process of a long-term transformation after the announcement last year of a hotel sourcing deal with Webjet that allows for significant cost-cutting.

TCG's market cap of £1.8bn means the Group trades at a PE ratio of 10x versus the industry median of 14x. Share prices over the past 5 years have followed the ebbs and flows of the Group's performance to currently trade at 120p per share.

Operating margins for TCG have remained slim, but with the strategic transformation underway consensus forecasts FY17's operating profit to be 15x that of 2016 - £150m compared to £10m.