TUI Wants to Be Game Changer in America

Europe’s biggest tourism group not only wants to expand in Asia but even enter the US travel market through online sales, according to CEO Fritz Joussen who has also confirmed TUI’s profit forecast for this year.

“We are going with our offer to China and the USA,” he declared. The TUI chief explained that the German group will not open any travel agencies in these new markets but will sell online through its international portal TUI.com.

Joussen has previously outlined the German group’s ambition to sell holidays in countries such as Italy and Spain along with emerging markets in Asia, especially China, and Brazil. But this appears to be the first time that he has referred to the large US market as well.

TUI is already active in China through a tour operator venture but is only a small player compared to giants such as Ctrip. Across the Atlantic, the group’s Canadian venture Sunwing, which has its own airline and hotels in the Caribbean, also sells holidays to US customers, experts noted.

Joussen also emphasized that TUI will invest heavily in digitalization to make customers more personalized offers in future. He underlined the financial importance of the group’s own hotels and cruise ships for profits as well as the strategy to expand sales of destination activities.

The comments came ahead of TUI’s pre-close trading update on Thursday in which the group confirmed its profit outlook for the year ending September 2018. Earlier this week rival Thomas Cook was forced to issue a profit warning due to disappointing summer sales.

Overall, TUI has 5% revenue growth in source market sales for summer 2018 (as of 23 September), with bookings up by 4%, average selling prices 1% higher and 98% of the program sold.

Revenues in the Northern Region, including the UK and Nordics, are 4% higher, based on a 2% rise in customer numbers and 1% rise in average prices. The Central Region, including Germany, has a strong 8% revenue increase, with a 7% increase in bookings and 1% improvement in prices. The Western Region has a solid 3% revenue increase, with 2% more customers and a 1% rise in average prices.

Commenting that the financial year “is closing out as we expected”, Joussen confirmed that TUI expects underlying EBITA growth of at least 10% this year despite “challenging” factors such as the hot summer in Northern Europe and disruption of airline operations.

“Having continued to expand our hotel and cruise offer, occupancies and yields remain high, and the number of customers purchasing holidays from us has grown in all major markets, even with the sustained period of hot weather in Northern Europe this summer. This demonstrates the strength and resilience of demand for our holiday experiences, although as previously stated the hot weather has limited our ability to outperform,” he said.

Tour operator sales are benefitting from increased capacity to Turkey, Greece, North Africa and Bulgaria while volumes to Spain “have continued to normalize compared with the very high growth seen in recent years”, the company pointed out.

For winter 2018/19, TUI so far has a 2% rise in customer numbers, with higher bookings in most markets, but a 1% drop in average selling prices as demand rises for North Africa and Turkey and “normalizes” for the higher-price Canaries.

The Hotels & Resorts business is benefitting from strong demand for major destinations and new openings, the Cruise business continues to perform well, and Destination Experiences has had strong organic growth in the final quarter, boosted by acquisitions.

Source: FVW (Germany)