TUI: annual profits +13% despite crisis in Turkey

TUI has raised its profit forecast for this year thanks to strong hotel results while Thomas Cook is keeping its outlook stable due to weak Turkey business.

Europe’s two leading tourism groups presented diverse pictures this week as they both issued trading updates for the year ending September 30 ahead of releasing full results in November/December.

Describing 2015/16 as “another very successful year”, TUI raised operating profit guidance for the full year results, saying that it is now confident of delivering between 12-13% growth in EBITA following on from the previous guidance of least 10%. “RIU and the Cruises division, together with the very positive development of the tour operator business in the UK, have contributed to this excellent result,” the German-based group said.

With 97% of the summer 2016 programme sold, revenue and bookings are up by 1%, including a 7% rise for all destinations with the exception of Turkey. Among source markets, UK revenues and bookings are 5% higher for this summer, while Germany has a 1% drop in revenues with a 2% fall in bookings but a 1% rise in average prices.

CEO Fritz Joussen said: “The 2016 summer season, which was a particularly challenging time for tourism companies and airlines, proved that we have made the right strategic choices. Investments in new hotels and additional cruise ships have allowed us to strengthen our own products and brands over recent months. Reflecting on our positive outlook, we are also currently seeing good growth in revenue of 11% in the upcoming winter season. Growth in bookings for our long haul destinations is driving this positive development.” Long-haul bookings are up by 26% in the UK and by 10% in Germany.

For winter 2016/17, TUI Germany has an overall 4% drop in bookings but a 2% revenue increase due to higher prices. “We are continuing to increase our market share, despite challenging conditions. Long haul bookings (which account for around one third of the programme) are up 10%, with growth driven by Thailand, USA and Mexico. However, this is offset by a reduction in demand for Turkey and Egypt. The Canaries continue to grow as an alternative to these destinations, albeit with a significant level of competition,” TUI stated.

Meanwhile, Thomas Cook Group is keeping to its forecast of operating profits of at least £300 million this year despite weak Turkey bookings. Overall bookings for summer 2016 are down by 4%, although the figure is an 8% increase when Turkey is excluded. The UK is performing well for Cook with a 1% rise in summer bookings and an 8% increase in winter bookings.

Germany, in contrast, is seeing weaker demand. Summer bookings are down by 6%, although the company claims: “We continue to outperform the wider tour operating industry.” Condor has a 3% drop in summer bookings, a 2% average price drop and lower yields due to overcapacity and pricing pressure.

CEO Peter Fankhauser said: “The Summer season has progressed largely as expected. Customers’ desire to go abroad on holiday has remained strong with the exception of Turkey where demand continues to be volatile. To date, sales for the Winter season are in line with last year while sales so far for Summer 2017 suggest that customers are booking early in an effort to secure their first-choice destination and hotel.”

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