Demand for travel is stronger than ever. It remains a priority for many according to recent consumer outlook surveys. With more people flocking abroad to spend time on the beach, I’m looking at travel-related FTSE shares to add to my Stocks and Shares ISA.
One FTSE share that I think could soar to new heights in 2025 is online travel agency On The Beach (LSE:OTB). The company had a record-breaking year in 2024. Pre-tax profits rose 25% to £31m, and total sales reached £1.2bn.
Why this is my favourite FTSE share
But what stands out is the company’s ambition for the coming years. It has a medium-term goal to double sales to £2.5bn. And management have a strategy that looks promising.
When looking for small but mighty growth shares, I like to find companies that offer something new. For instance, it could be a new product, service, or technology. This FTSE small-cap share has three new developments.
For instance, On The Beach expanded its business to offer city break holidays. This should allow it to capture a larger share of customers’ holiday wallet.
It also started selling holidays from Ireland. This makes sense as it has similar trends and taste for holidays as the UK.
In addition, On The Beach managed to secure a partnership arrangement with low-cost airline Ryanair. This means that it’s now easier for customers to search for Ryanair flights as part of their holidays.
The partnership also resulted in lower admin costs for On The Beach, boosting its profit margin.
Fundamentally solid
Its potential is underpinned by strong financials. Despite sales and profits that are expected to rise by double-digits over the coming years, it remains remarkably cheap. This share offers a price-to-earnings ratio of just 14.
I’d class this as a high-quality business given its 25% profit margin and 19% return on capital employed.
I also like that it has a market capitalisation of just £410m. Small companies of this size can multiply much faster than the large FTSE 100 shares.
Some points to note
Bear in mind that smaller companies can carry more risk. This share in particular is focused on the travel sector. In recent years, the pandemic was detrimental to so many travel-related businesses. And any future crisis that prevents travel would likely hurt these shares.
In addition, if there was an economic downturn, it could also reduce demand for holidays.
Note that between 2021 and 2023 On The Beach shares fell by a whopping 58%. That said, since then, travel has bounced back.
Just recently, the world’s second-largest online travel agency Expedia reported “better-than-expected travel demand”. And several airlines recently reported renewed consumer confidence. That bodes well for On The Beach, in my opinion.
I happen to think this is one of the best opportunities for a FTSE growth share this year. As such, as soon as I can free up some cash, I’ll be popping it into my ISA.
