TUI launches €500m hotel investment fund

Insight Comment It’s not long ago that TUI was happily going against the grain with its asset-heavy approach. Then abruptly it changed course and the pandemic struck putting it under a severe amount of financial pressure. The company now thinks it has come up with a way to carry on growing without putting in much of its own money.

Travel giant TUI Group has launched a €500 million hotel investment fund in cooperation with German investment company Hansainvest.

The Hanover-based company is looking to tap institutional investors to help it grow its hotel portfolio, rather than have to pay for the expansion all itself.

One of Germany's largest pension funds has already made a capital commitment for a significant share of the fund’s planned equity volume and TUI itself will hold a 10% stake in the fund's equity.

The focus of this first fund is on growth in the hotel segment outside Europe. In the future, other funds could be used to focus on Europe.

The fund is designed for growth and plans to predominantly invest into new hotel properties which will be acquired or newly developed and which are currently not part of TUI. Hotels from TUI’s current portfolio may also be acquired by the fund. The properties will mainly be operated under the company’s international hotel brands (such as Robinson or TUI Blue) and managed operationally by TUI.

What They Said

Peter Krueger, member of the TUI AG executive board responsible for Group Strategy and M&A, as well as TUI's airline, cruise and hotel assets and JVs, said: "Following the successful relaunch of our operating business, we are now returning to growth. We want to further expand our position as the leading international leisure hotel company. 

“As TUI, we focus on what is crucial for our guests: strong brands, outstanding hotel quality and service. Our core competence is the development and operation of international hotel brands, not necessarily a return on property investments. With the launch of the hotel fund, real estate investments are separated from hotel brands and hotel operations. This allows us to grow in a less capital- intensive way. At the same time, we offer institutional investors such as insurance companies or pension funds an attractive investment opportunity in the asset class of leisure hotel real estate. 

“We have proven over decades that we can successfully build up a hotel business and develop new destinations. Not only in areas already developed for tourism such as the Mediterranean region, but also in new destinations such as Cape Verde. We see ourselves as designers and operators of hotel brands as well as developers of holiday destinations. This is where our strength and expertise is, and we will be focusing on this in future.”