Why TUI is confident of a bumper summer

Insight Comment Looking at TUI’s forward bookings, there are plenty of reasons to be optimistic. The company seems well placed to take advantage of a return to normality this summer. But June is still a long way away and plenty can happen in that time. No one in the industry should be counting their chickens just yet.

A couple of days ago we wrote about how travel and hospitality companies might be placing too much weight on consumer demand returning to pre-pandemic levels any time soon.

Part of that was down to the intriguing results of a survey from analysts at Morgan Stanley, but we also suggested that the impending cost of living crisis in places like the UK might put people off booking an expensive foreign holiday this year.

Well, travel giant TUI doesn’t think this is the case. In its first-quarter financial update the company said it was seeing a “very strong booking dynamic for summer 2022.”

At the end of January, around 3.5 million people had booked a trip for later in the year, around 72 per cent of the level of summer 2019. However, new bookings are now over 100 per cent of that level, so TUI now expects this year to be close to the pre-crisis levels.

That kind of performance would be a remarkable turnaround for TUI, given how much it has been bruised by repeated lockdowns and restrictions during the last two years.

Even so, TUI and the rest of the industry needs to be mindful of the fact that things can change quickly. Just look at the speed with which the Omicron variant took hold.

Also if you’re worried about the energy prices going through the roof, maybe you’ll put off committing to anything until later in the year.

None of that seems to be worrying TUI CEO Fritz Joussen, who said in a statement accompanying the results: “TUI CEO Fritz Joussen: "We expect a strong summer 2022. The path out of the pandemic is becoming increasingly clear. Demand for travel is high across all markets. TUI has used the time to transform: we are leaner and more efficient today and are becoming more profitable than before the crisis.”

TUI’s performance in the traditionally quieter first quarter was better than a year ago, which given the impact of Omicron, was fairly impressive.

Revenue reached €2.37 billion, five times higher than in the previous year. Pre-tax losses fell 61% to €271.4 million.

Richard Clarke a senior analyst at Bernstein, said the update represented “rare stability in messaging”.