Demand for On The Beach holiday packages strong despite consumer caution

(Reuters) - Package holiday provider On The Beach Group said on Tuesday that demand for its European city packages was healthy despite broader inflationary concerns, and forecast summer bookings to be significantly higher than last year. 

The company said it expects annual adjusted pretax profit in line with market expectations of 38.2 million pounds ($48.2 million), a 23% jump from its reported earnings last year.

With UK inflation at a 10-month high, there are worries that British travellers may be deterred from booking popular holiday destinations such as the Mediterranean and the Canary Islands, among others.

But OTB said strong early bookings for the summer and a 17% jump in sales from a year ago for the next four months indicated that "customer demand for holidays, from On the Beach in particular, continues to buck wider UK consumer trends."

OTB shares rose as much as 2.7% to 244 pence in early Tuesday trade before settling marginally higher by 0930 GMT.

Last year, the company started selling packages that focus on city destinations rather than beach locations and launched the sale of package holidays for customers in Ireland to boost its business.

"Demand for cities has been strong, with routes to Amsterdam, Paris and Krakow proving particularly popular with both existing and new customers," CEO Shaun Morton said in a statement.

Morton also said that its marketing campaign in Ireland had led to strong bookings there.

Analysts at Peel Hunt reiterated their 'buy' rating and 300 pence price target on the company's stock, and said OTB's products and marketing "are cutting through to a cautious consumer."

The company's upbeat view contrasted with that of travel company Jet2, which last week warned of margin pressure due to high inflation and limited predictability of future bookings.

($1 = 0.7920 pounds)

(Reporting by Shashwat Awasthi; Editing by Rashmi Aich and Rachna Uppal)