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TUI Group Expects “Solid Performance” in 2019

TUI Group Expects “Solid Performance” in 2019

TUI Group bookings for the current summer 2019 (as at 4 August 2019) are down 1% year-on-year, improving from the booking performance delivered in the first half of 2019 (-3%), and TUI expects the recent positive trend to continue.

“Despite the challenging environment in 2019 to date, our underlying business remains robust, and we expect to deliver a solid performance in 2019, which, however, will not match the prior year’s result, as expected due to the grounding of the B737 MAX, said Fritz Joussen, Chief Executive, TUI Group, at the presentation of the Q3 2019 results. “Hotels & Resorts will benefit from our diversified portfolio and Cruises will deliver strong growth. We have significantly reduced our dependence on traditional tour operators over the past five years. The transformation of our Group will continue. The tour operator businesses in our European markets will be brought together faster and more effectively. We are consistently pursuing our digital transformation to develop TUI into a global platform organisation. The strength of our globally unified brand and direct access to our customer base, already comprising more than 21 million customers, offers great potential for the future.”

In the period under review, TUI Group increased its turnover by 3.7% to €4.745 billion (previous year €4.576 billion). On a constant currency basis, turnover grew by 4.4% to €4.777 billion. At €100.9 million, underlying EBITA declined by 46.0% year-on-year (€186.8 million), in particular due to the impact of €144 million as a result of the grounding of the B737 MAX. On a constant currency basis, it decreased by 49.2% to €98.9 million (previous year €194.6 million).

The Holiday Experiences segment, comprising Hotels & Resorts, Cruises and Destination Experiences, delivered an increase in underlying EBITA of 16.7% to €208.3 million in the period under review (previous year €178.5 million).

As expected, and in line with the announcement made early this year, the Markets & Airlines business performance was also significantly impacted by the B737 MAX aircraft grounding, ongoing since March, as TUI launched a number of measures, including the securing of replacement aircraft capacity for the grounded aircraft until the end of the summer season. Total costs related to the grounding will be approximately up to €300 million in the full financial year 2019.

TUI also saw delayed customer bookings driven by the summer 2018 heatwave, the continued Brexit uncertainty, and considerable aviation overcapacity to Spanish destinations continued in the third quarter. In the period under review, underlying EBITA amounted to -€103.9 million, down on the positive prior-year comparative (previous year +€37.2 million), in particular due to the grounding of the B737 MAX with an impact of €144 million.

The Group has reiterated its guidance for the full year 2019: as announced on 29 March 2019, underlying EBITA will be approximately up to 26% down compared with the rebased underlying EBITA for financial year 2018 of €1.177 billion.

Transformation of Tour Operating to Be Accelerated
TUI said: “Despite the current challenges and volatility in the tour operating business, TUI remains in very good shape. The Group is an international market leader and well positioned for a potential market consolidation in the industry.

“After the transformation of the Group initiated in 2013, the Markets & Airlines segment (Tour Operators) accounted for 30% of TUI’s earnings, while 70% of earnings are delivered by Holiday Experiences (Hotels, Cruises, Destination Experiences). Traditional tour operators ensure direct access to customers in our European source markets. We will continue to strengthen our competitiveness in this area, too, by harmonising our tour operation business, accelerating its transformation and thus increasing its efficiency and profitability. Within the next 18 to 24 months, the European source markets will be more closely aligned. At the same time, TUI is driving the digitalisation of the Group further ahead and is investing in state-of-the-art technologies and a unified customer platform (CRM). “TUI has entered the next phase of its transformation to develop into a global platform company. Driven by the acquisition of the Italian technology platform Musement, the tours and activities business in the destinations will be significantly expanded. In March 2019, TUI and Ctrip had concluded a significant co-operation scheme. The around 200 million users of the leading Chinese online travel agency will have direct access to the portfolio of tours and activities offered by Musement. The Group will also accelerate its ‘TUI 2022’ strategy programme.

“Due to the global expansion of the TUI brand, TUI will tap new markets, in particular in emerging economies with growing middle classes such as China, India, Brazil and Malaysia. A further partnership was recently concluded in South East Asia: TUI will team up with Malaysia Airlines to establish its Malaysia Airlines Holidays business. TUI will tap these future markets through a fully digital approach via an innovative and globally scaling distribution and marketing platform, which forms the basis of TUI’s state-of-the-art IT infrastructure.

Overview of Segments

Hotels & Resorts delivered a significant increase in its operating result in Q3 2019. While average occupancy remained high at 80%, average revenue per bed rose, driven partly by the shift in demand from the Western to the Eastern Mediterranean. In the quarter, TUI opened new hotels in the Caribbean, Italy, Eastern Mediterranean, North Africa, the Maldives and Bulgaria. Since the merger, its portfolio has grown by 67 new hotels.

  • Underlying EBITA: +26.4% to €91.5 million (previous year €72.4 million)
  • Underlying EBITA at constant currency: +12.2% to €90.0 million (previous year €72.4 million)
  • Average revenue per bed: +5.4% to €60
  • Average occupancy: -0.4 percentage points to 79.8%

Cruises: In Q3 2019, all three cruise brands operated by the Group continued their growth roadmap and delivered a significant increase in their operating results. With the launch of HANSEATIC nature and Marella Explorer 2 in May 2019, TUI’s cruises fleet grew to a total of 17 ships.

  • Underlying EBITA: +14.4% to €101.5 million (previous year €88.7 million)
  • Underlying EBITA at constant currency: +14.5% to €101.6 million (previous year €88.7 million)
  • Average rate per passenger per day:
    • TUI Cruises: €190 (previous year €200)
    • Marella Cruises: £144 (previous year £138)
    • Hapag-Lloyd Cruises: €584 (previous year €571)
  • Average occupancy:
    • TUI Cruises: 99.5% (previous year 98.8%)
    • Marella Cruises: 98.5% (previous year 100.3%)
    • Hapag-Lloyd Cruises: 74.7% (75.6%)

Destination Experiences: The TUI Destination Experiences segment (tours and activities in the destinations) is a growth area and has been strategically expanded since 2018 through a range of measures including the acquisition of Musement and Destination Management. In the period under review, the number of excursions and activities sold almost doubled to 2.3 million (+92%). Due to the costs for the integration of Musement, underlying EBITA declined year-on-year. Excluding these integration costs, underlying EBITA grew by 3% year-on-year.

  • Underlying EBITA: -12.1% to €15.3 million (previous year €17.4 million)

Markets & Airlines: Although the market environment remained very challenging, the Group’s Markets (tour operators) & Airlines business delivered an increase in customer numbers to 6.028 million (previous year 6.024 million). At €4.0 billion, turnover also grew year-on-year, up by 0.4% (€3.99 billion).

  • Underlying EBITA: -€103.9 million (previous year +€37.2 million)

Summer 2019: Bookings for the current summer 2019 (as at 4 August 2019) are down 1% year-on-year, improving from the booking performance delivered in the first half of 2019 (-3%). Average prices are up by 1% and TUI expects the recent positive trend to continue as it laps the extended heatwave in the prior year.

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NEIL STEEDMAN has been a trade journalist, copywriter, editor and proofreader for 52 years, and News & Features Editor for ‘Irish Travel Trade News’ for the past 42 years.

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