We believe On The Beach (OTB) is a great business with a superb track record of using technology and marketing to attract customers and get them to spend money.

It is an online retailer of mainly short-haul beach holidays, allowing people to build their own vacation by picking their flights, hotels and services.

Customers are regularly drawn to On The Beach for its wider selection of flights and hotels at attractive prices compared to tour operators, which often offer less flexible packages at a higher price tag.

It has a bespoke in-house recommendation system which works by taking cues from how someone browses its website and dynamically adapts the content presented. It personalises holiday suggestions based on various facets of hotel and flight browsing detail.

On The Beach continuously tests changes to its website to see the most effective ways of converting visitors to sales. This testing also helps ensure the browsing and transaction process is as smooth as possible for the customer.

Furthermore, it has invested in booking management capabilities and reminder functionality so that customers can interact with the company via an app before, during and after their holidays. The company also offers a 24 hour telephone service if problems arise during someone’s holiday.

All of these initiatives help to improve customer satisfaction and drive repeat bookings. The company said in November that its repeat purchase rates had increased significantly in 2018.

The group is expanding outside of the UK and now has a presence in Sweden, Norway and Denmark. International operations are currently loss-making as the company enters new territories.

On The Beach benefits from both organic and acquisitive growth, with the latter including ownership of Sunshine.co.uk, an online low-cost travel agent; and Classic Collection which is a business-to-business provider of packaged luxury beach holidays to offline travel agents in the UK.

It plans to launch an online B2B platform for Classic Collection’s travel agent users, leveraging On The Beach’s existing technology and breadth of supply.

Group pre-tax profit is expected to rise from £26.7m in 2018 to £40.5m in 2019, according to consensus estimates. The shares look great value at 14.4 times forecast earnings when you consider that rate of predicted growth.

Numis analyst Richard Stuber forecasts 16% compound annual growth in earnings per share between 2018 and 2021.

On The Beach has a £47.3m net cash position, effectively giving it the financial firepower to consider further acquisitions and/or money to support the business if times get tougher.

The group is looking to boost its long-haul beach holiday sales and bolt-on acquisitions could potentially help to accelerate this strategy.

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