A strong desire for shorter breaks and a move away from the traditional family fortnight in the sun would appear to be the trends emerging from tour operator Thomas Cook's (TCG) pre-close trading statement.

Shares in the world's oldest travel agent rise 1% to 183.2p as investors are told that bookings from the UK are 2% higher than last year, excluding Egypt where political uncertainty continues adversely affect bookings across the group.

The Winter 2013/14 season is now drawing to a close with bookings to date down 4% in overall terms, as result of disruption in Egypt. Excluding this factor, bookings are up 1%.

Pricing continue to be impacted by a higher proportion of one-week duration holidays and competitive pricing in certain destinations as market capacity was redirected from Egypt. Average selling prices are 3% lower than last year but chief executive Harriet Green says this slip is more than mitigated 'through the more integrated management processes and improved customer service that we introduced last year.'

Once one tunes out the Egypt effect, Thomas Cook achieves higher average selling prices and bookings while gross margins are positively impacted by improved yield management and cost efficiencies.

Continental European selling prices also achieve some traction, rising 4% due to strong performances in most source markets, with pricing improvements in Germany at 3% being most notable. The travel agent maintains that the reduction of low value, low margin business has resulted in improved margins compared to last year.

The ongoing step changes being implemented by Green and her team suggest that the tour operator is on track to continue delivering significant profit increases over the coming quarters. Interim results in May should offer further guidance as to the detail of Wave 2 of the firm's Cost Saving and Profit Improvement Programmes.

Oriel Securities analyst Jeffrey Harwood maintains that today's update 'reaffirms the scope for Thomas Cook to radically improve its profitability in the medium term. Our short term price target is 200p, based on 12 times expected earnings for next year, and we see further good upside in the medium term.'

Issue Date: 27 Mar 2014