Results

TUI ‘ready to go’ says CEO

TUI Group CEO Fritz Joussen told analysts that the company would “reinvent the holiday in 2020”.

Commenting during the group’s first-half results, the CEO said: “Summer holidays are possible responsibly and with clear rules”.

As at 10 May, TUI’s total cash and available facilities amounted to €2.1bn. The group said: “Future TUI will be leaner, less capital intensive and more digital, creating an even stronger and more agile business”. The group successfully applied for a KfW bridging loan of €1.8bn last month.

Joussen said: “TUI is ready for an early resumption of travel activities in Germany and Europe. Barely two months after almost all business units had to be shut down due to the worldwide travel bans, the tourism group is prepared for a resumption of its operational activities. TUI's first hotels on Sylt and in Mecklenburg-Western Pomerania will open their doors for guests in the coming days.”

He added: “Organised travel offers great advantages especially now. With the trusted TUI brand, we offer safety, local support and, in special situations, guarantee the return journey home. Together with the destinations and our partners we have developed extensive measures to protect our guests. The demand for holidays is still very high. People want to travel. Our integrated business model allows us to start travel activities as soon as this is possible again. The season starts later, but could last longer. For 2020 we will also reinvent the holiday: New destinations, changed travel seasons, new local offerings, more digitalisation.”

The group said that, at the end of the first half, the majority of hotels were closed as a result of global Covid-19 measures, with a very small number of hotels remaining open to host customers who were awaiting repatriation. From mid-April all hotels across the portfolio were closed in line with government advice.

The group said: “By the beginning of March we were experiencing lower travel demand, however our year-to-date bookings remained well above prior year. The further spread of Covid-19 in the following days led to the decision to trigger Force Majeure notices to all third-party hotelier partners, enabling either a cancellation or reduction of committed capacity contracts for the remainder of the season.”

The company added that it had renegotiated rental lease agreements with its landlords in the hotel and resorts division. TUI said that it would continue to pursue its asset-right strategy in the hotel division, which has seen it purchase a small number of properties.  

Hotels and resorts saw both increased occupancies and rate against the previous year on a five-month basis. For the first half, occupancy was down two percentage points to 75%, with average rate per bed increasing by 2% to €73. First-half earnings were down €75m on the year to €59m, with Ebitda down by 32.9% on the year to €124.2m.

During the first half Riu increased its equity stake in TUI to 3.6%.

Joussen concluded: “TUI should emerge from the crisis stronger. But it will be a different TUI and it will find a different market environment than before the pandemic. This will require cuts: in investments, in costs, in our size and our presence around the world. We must be leaner than before, more efficient, faster and more digital. We will implement our ‘asset right’ strategy, which we launched in 2019, even more purposefully and quickly. We will become more digital at all levels – in particular, we will accelerate the expansion of digital platforms in new markets and for our activities in the destinations.”

 

Insight: There is no denying that it’s one thing after another at TUI and just when it looked to have overhauled itself, heading for an even keel, a pandemic came along. Now it’s shedding 8,000 jobs which, it said, would not be coming back.

There are, happily, two things going for the company. Firstly, unlike at Thomas Cook, the company has a government which gives a damn and is prepared to step in and help it out - this despite travel and tourism contributing less to GDP in Germany than it does in the UK.

Secondly, the company has the weight of the brand behind it, at a time when the consumer is anxious about travel. When leisure travel comes back, the consumer, eager for sun and sangria, will need persuading that it is safe  - to reference Jaws - to enter the water. TUI has an extensive plan around cleanliness, published earlier this week. One can also isolate on a resort far better than on a city break.

This is very handy, given Spain’s decision to quarantine overseas guests for two weeks after arrival. One person’s quarantine is another’s sun, sea and sofa substitute. TUI is eager to offer that home-confinement from home.