TUI says that the uncertainty of ‘Brexit’ and oversupply to Spain continues to damage its reserves

It plans to reach 70 hotels of its own, slightly above its initial objective

TUI Group, the largest tour operator in the world, has detected delays in customer reservations during its third fiscal quarter (April-May-June) due to the continuing uncertainty of the ‘Brexit’, the price reduction and the “considerable” air overcapacity to Spanish destinations.

The group notes that its diversification strategy is offering clear benefits from the change in demand from the western Mediterranean to the east, which they expect will continue in the fourth quarter. So while RIU hotels, a company owned by the tour operator, have registered “lower demand in Spain”, Turkish establishments have achieved “a significant improvement” as a result of this turn in demand.

The German company, which has doubled its ‘red numbers’ in the year, says that despite the current challenges and volatility in the business of tourism operations, it is “in very good shape” and “well positioned” to the consolidation of the holiday industry.

TUI ensures that traditional tour operators guarantee direct access to customers in European markets. And it is that their hotel and resort units are benefiting from “a more diversified portfolio” and cruises are registering significant growth.

“We will continue to strengthen our competitiveness in this area and harmonize our tourism operations business, accelerating its transformation and thus increasing its efficiency and profitability,” said the group, which expects an improvement in European markets over the next two years.

RESERVATIONS AND LOWER PRICES

For the summer of 2019, 87% of the program is sold compared to the 88% registered this time last year. However, reserves have fallen by 1%, with a sales price of 1% above average, as reflected in its report for the third quarter of its fiscal year.

TUI trusts however in an improvement of the results this summer. The reserves and the margins have improved during the last weeks, however, the prices are still behind the increase in costs, therefore they anticipate that the margins will be lower than those of the previous year.

To this is added the impact of the declared cost of having to leave its 15 737 MAX airplanes on the ground, with a cost of 144 million euros, which will amount to 300 million at the end of the full year.

The company explained that after the transformation of the group started in 2013, the market and airline segment (tour operators) represents 30% of its profits while the remaining 70% of its income comes from Holiday Experiences (hotels, cruises and experiences at destination).

PREPARE TO REACH THE 70 OWN HOTELS

Its strategy of diversification of destinations, focused on Holiday Experiences, lies not only in the investment made to offer a differentiated content but also in its expansion in multiple hotel destinations.

The company has opened a total of 23 of its own hotels and expects to open another 26. With this, it expects to reach 70 establishments, slightly above its initial objective, which was about 60 hotels. Approximately two thirds will be operated through an administration or franchise agreement.

In the cruise area, the launch of three new ships this year has allowed them to obtain positive results driven by the strong demand for itineraries, the ‘All Inclusive, as well as the supply of luxury products. In the coming months, they hope to expand the product portfolio and third-party distribution channels (as with Ctrip) of our digitalized platform, driving further future growth.

In the cruise area, the launch of three new ships this year has allowed them to obtain positive results driven by the strong demand for itineraries, the ‘All Inclusive, as well as the supply of luxury products. In the coming months, they hope to expand the product portfolio and third-party distribution channels (as with Ctrip) of our digitalized platform, driving further future growth.

At the same time, TUI is driving the group’s digitalization by investing in cutting-edge technologies and a unified client platform (CRM). The acquisition of the Italian platform Musement, specialist in tours and activities in destination, will allow to expand your business “significantly”.

TUI says that the uncertainty of ‘Brexit’ and oversupply to Spain continues to damage its reserves

The group has also accelerated its strategic program ‘TUI 2022’. Due to the global expansion of the brand, the company will take advantage of new markets in particular in emerging economies with medium growth such as China, India, Brazil and Malaysia.