Tourism sector forecasts
The advancement of vaccination plans around the world is being essential not only to fight against the coronavirus, as is evident, but also for the recovery of consumer confidence and the reactivation of the world economy, in which the market travel is a key piece. Therefore, from the tourism sector we can only be optimistic. We know that the demand for travel has not disappeared, because travel is intrinsic to the human being, and it is only accumulating. Therefore, as soon as travelers feel that the necessary conditions are in place to travel the world safely again, they will do it again with more enthusiasm than ever. And it is that the travel demand accumulated in recent months is ready to emerge, and it is a matter of time before a greater proportion of the population is immunized against COVID-19 and ready to get on a plane in a very significant way in the next months.
This is demonstrated by the latest search data from eDreams ODIGEO, which indicates that consumers are feeling more and more confident and are already starting to plan their next trips. This denotes the irrevocable desire that people have to travel, so we have a golden opportunity before us to make these trips a reality as soon as possible, something that also makes the work of the public-private sector essential in this line.
Against this background, we are optimistic and we expect a gradual start to recovery in the coming months. Everything points to what In 2021 we will see the beginning of the recovery and that in 2022 we will approach a normality closer to the one we knew before the health crisis.
Competitive advantages of eDreams ODIGEO
And when everyone’s accumulated desire to travel “explodes”, the goal of eDreams ODIGEO is to maximize this opportunity thanks to our competitive advantage. Unlike other competitors, we have a strong business model, with sustained growth, we have kept our teams intact and motivated, our strategy has been paying off and our finances are solid. In this sense, since the pandemic began we have carried out a very prudent management of our business. We have ensured that we maintain a solid liquidity position and have the financial flexibility to cope with these months of reduced demand. For this reason, leverage levels have been slightly affected. Last April we announced that after successful negotiations with our lenders, we achieved an exemption for the entire fiscal year 2021 of our SSRCF or Super Senior Revolving Credit Facility credit line, from the only commitment in our gross leverage ratio, thus achieving greater financial flexibility to the company. SSRCF interest and 2023 senior debt will continue to be paid as usual.
To all this we must add that we are equipped with the best technology to remain leaders in the post covid world. Our goal is to continue transforming the travel industry through technology. We are a technology company, and as such, we closely monitor and value all innovative solutions such as blockchain and adaptive cybersecurity, in order to establish if they can be of value to the experience of our clients and to our company. In this sense, we do not understand technological advances as a threat, rather on the contrary, they are an opportunity for us.
Regarding disintermediation, it is not something that worries us, basically because the business model that we have been promoting goes far beyond mere intermediation: we are a comprehensive provider of personalized trips. It is a service that moves away from mere intermediation and in which the main beneficiary is the traveler. In addition, the latest studies support the potential of our business model in the post-covid world. According to an independent study carried out by the firm OnePoll with 10,000 travelers from all over the world, 8 out of 10 say that they prefer to book through online travel agencies such as eDreams ODIGEO because it allows them to enjoy more options, save time, gain flexibility and find better prices, contrary to what is achieved by booking directly with each tour operator separately.
In this sense, it should be noted that the pandemic has strongly accelerated the transition from offline to online, which was already taking place, and consumer habits are increasingly linked to online and mobile, two areas in which we are leaders. Over the last few years we have already been observing a progressive transfer of clients from traditional physical agencies to online ones such as eDreams, due to the digitization process that we live in all spheres of life. Consumers are becoming more used to shopping online, and the pandemic has further accelerated this trend. In this context, many companies have been forced to accelerate their digitization to be present in the online environment, and this seems a sine qua non condition to continue growing in the coming years.
On the other hand, one of the revolutionary changes that we have recently brought to the sector is the eDreams Prime subscription model, and we will continue to innovate to further strengthen this unique format in the industry that transforms the relationship with travelers, going from the merely transactional to a long, quality and stable relationship, something will be especially relevant in the post-covid world since it will allow people travel cheaper and cheaper.
We are very proud of Prime, as it is a pioneering and unique value proposition for travelers in the industry. The benefits for the user are clear: discounts on all flights from the first booking, savings of up to 50% in hotels, priority access to exclusive offers as well as a premium and personalized customer service. The subscription model has proven to be a successful formula in other industries and we are very proud to bring it to the travel industry for the first time. At the business level, it is a very important model because it lies in something essential for us: the loyalty of our customers. The eDreams Prime formula evolves from the traditional approach of the travel sector, based on the transaction, to that of the subscription, which personalizes the offer to each traveler and rewards their loyalty and permanence with the most convenient travel plans and prices most competitive in the market. It is a program that, despite its youth, has already proven to be a successful formula, and is growing adequately at the moment despite difficult market conditions.
In the third quarter of the fiscal year that we just closed, Prime membership increased by 55% to 758,000 subscribers and 37% of the Group’s bookings are currently made through Prime. Another significant piece of data is that Prime’s deferred income reached 20 million euros in that period, representing an increase of 126% compared to the third quarter of the previous year. Our forecast is to continue supporting and betting on this pioneering and unique service in the industry to reach 2 million subscribers by 2023.
Regarding the stock market trend of eDreams ODIGEO securities, we cannot foresee how the market will evolve but we are convinced that the current price still does not reflect the real value of the company, especially considering that we are facing the post- covid with a strong business, with solid accounts, leading brands and a unique technology in the sector that will undoubtedly make us lead the recovery of tourism and will allow us to maximize the accumulated demand for travel. We hope that the market will recognize this as well.
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