First Choice goes upmarket with purchase of US tour firms

The tour operator First Choice took what it called a "pivotal" leap into the US travel market yesterday with the acquisition of two specialist holiday companies for £91m.

Peter Long, its chief executive, is hoping to corner the market for trips taken by retired Americans who can afford to blow upwards of $7,500 (£4,300) on a two-week trip to an exotic destination.

He has agreed to pay £54m for Grand Expeditions, which offers round-the-world holidays on a private jet for $40,000 per person, escorted tours to countries such as India and yachting trips. He is also paying Switzerland's Kuoni £37m for a company that provides trips on special ice-breaking ships to both of the Poles.

Mr Long is attempting to repeat the success the group has had in continental Europe, a market it has gained scale in via a series of acquisitions made over the past five years. "It's reminiscent of 2000 when we bought Ten Tour as our footprint into continental Europe."

In the US, First Choice intends to carve its niche in the student travel and over-50s market, which Mr Long split into the 50- to 60-year-old "boomers" born after the war, and the "grey" market, which encompasses everyone over 60. The tour operator makes about 10 per cent of its revenues in North America but hopes to double this over the next few years.

The acquisitions came as First Choice announced a 20 per cent rise in pre-tax profit to £89.1m on revenues up 11 per cent to £2.6bn. The group said the record result was a vindication of its decision to scale back its dependence on traditional European bucket-and-spade destinations in favour of further-flung locations.

Mr Long said the group, which has spent £65m buying 12 companies during the past 12 months, could afford to spend a further £150m on deals this year. The company is keen to buy companies specialising in adventure holidays, student travel or escorted tours - all areas that are growing faster than the standard sea-and-sun holidays.

For summer next year, First Choice is offering package deals to Brazil for the first time. So far, demand for the two-week all-inclusive holidays, which cost £1,000 per person, is outstripping that for all its other destinations, Mr Long said.

During the past year, the group's mainstream holidays division achieved an 11 per cent rise in operating profit to £54m on sales up 3 per cent to £1.2bn. Its specialist holidays arm was hit by a turbulent year that included the Asian tsunami, various American hurricanes and the bombing on Egypt's Red Sea coast. The division's operating profit increased by 35 per cent to £32m on turnover up 16 per cent to £891m.

Giles Thorley, Punch's chief executive, has joined the board as a non-executive director.