IN 1874 Thomas Cook, one of the first organisers of excursions, issued circular banking notes to travellers who wanted to buy foreign currency abroad. It was an early form of foreign exchange and later became known as traveller’s cheques. More than 130 years later, the company founded by the Baptist minister from Derbyshire is again turning to financial services to fuel its growth.

Chief executive Manny Fontenla-Novoa, heading an FTSE 100 company for the first time after Thomas Cook’s merger with MyTravel, admits he is on a “tremendous learning curve”.

The traditional package-holi-day industry has little growth in it, and the big holiday firms are searching for other ways to expand. Fontenla-Novoa, who was born in Spain and moved to Britain when he was 11, thinks the answer lies in financial services. He will offer more travel insurance, foreign-cur-rency exchange and credit cards to the customers the company is already dispatching around the globe and those yet to avail themselves of the group’s tours.

Fontenla-Novoa said: “I am a believer [in package holidays] but I know they are not growing. I know you are not going to get top-line growth from mainstream holidays.”

Despite this, the Thomas Cook boss remains optimistic about the future for the company, which has a market value of £2.8 billion.

“Travellers are waking up to the fact that using a cash machine to get money when they are overseas is an expensive way of buying foreign currency,” said Fontenla-Novoa, who is proud that his company has one of the three contracts to run a bureau de change at Heath-row’s new Terminal 5, which opened this weekend.

Thomas Cook’s ambitions to expand in financial services are not confined to currency exchange. The group sees an opportunity to boost sales of travel insurance, after a change in the law allows it to sell standalone insurance products. And it has recently launched a Thomas Cook-branded credit card in a joint venture with Barclaycard.

In the period between 2005 and 2006, Thomas Cook’s revenues from financial services were €215m (£165m). The company hopes this will almost double by the end of the 2009-10 financial year to €370m. That would represent an increase from 2% of group revenues to 3%, with the possibility of further growth after that. Revenues from mainstream package holidays are expected to shrink from 80% of total income to 72% over the same period.

The expansion in financial services will not be easy, according to analysts. Wyn Ellis, leisure analyst at stockbroker Numis Securities, said there were “a number of challenges”.

He argued that the convenience of using cash machines to obtain money abroad would probably see that habit continue, especially if fees start to fall.

Ellis also thought the decline in the high-street travel agency – Thomas Cook and MyTravel have closed 144 shops since they merged – may hinder the growth of insurance sales.

“The success of the current travel-services operations is largely dependent on the bricks-and-mortar travel-agency shops. If their number continues to shrink, profits growth may be more difficult to come by,” he wrote in a note to clients.

A rival leisure analyst was more blunt: “It feels a bit tacky, jamming financial-services products down someone’s throat if they don’t want them.”

Thomas Cook’s management clearly does not see it that way and is encouraged by some of its recent initiatives. The credit-card business is in its infancy, but Fontenla-Novoa reports that in January his staff signed up 1,000 cardholders, which he believes is a good start.

The group also has its sights on developing financial services in emerging markets. The acquisition earlier this month of Thomas Cook India included the purchase of the country’s largest foreign-exchange business.

One deal that Fontenla-Novoa has ruled out is the takeover of Travelex, the foreign-exchange company owned by Apax Partners, the private-equity firm.

Some years ago, Travelex acquired Thomas Cook’s traveller’s cheque operations as part of its own expansion drive. The tour operator does not envisage buying back the enlarged Travelex as a short-cut to achieving its own growth targets.

“I have no wish to buy that business,” said Fontenla-Novoa. “We have a very close relationship - they are our foreign currency provider - but they are not on our list [of acquisition targets].”

While sales of package holidays might be falling, profits are likely to be boosted by cost-cutting and consolidation, so Fontenla-Novoa is not too concerned by how the current economic slowdown will affect the group. He thinks a main summer holiday is the last thing a family cuts, after home repairs, new cars, clothes and dining out have all been chopped.

“Over the past 10 years, 19m people have gone on package holidays every year,” he said. “That number has stayed consistent all those 10 years. The industry may not be recession-proof but it’s resilient.”

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