TUI Group

Market share gains in Germany

TUI is profiting from hotels and cruises expansion, and claims to be winning market share in Germany with high single-digit revenue growth for the summer 2017 season.

May 17, 2017
TUI CEO Fritz Joussen
Photo: Rüdiger Nehmzow

Europe’s largest tourism group increased overall turnover by 3.3% to €6,382 million in the half-year ending March 31, 2017. The seasonal loss in operating profits (reported EBIT) was reduced to €310.8 million from €422.9 million last year, and the overall group loss was reduced to €308.6 million from €394.9 million.

At constant currency rates and on a like-for-like basis excluding the late timing impact of Easter 2017, underlying EBITA improved by 6.3% to a seasonal loss of €193.3 million. Including foreign exchange translation and the Easter timing impact, it declined by 3.8% to -€214.4 million.

The key drivers were higher profits from the hotels and cruises businesses. TUI’s hotels business improved operating profits (reported EBITA) by 26% to €120 million and underlying EBITA by 28% to €122.8 million, on turnover up 13% to €300 million. The cruises business, now including Thomson Cruises, increased turnover by 12% to €346 million while EBITA was up by 52% at €75 million.

Among the major source markets, the Northern Region (including the UK) had a 5.3% turnover drop while the underlying seasonal loss widened by 14%.

The Central Region (Germany, Austria, Switzerland, Poland) increased turnover by 2.1% to just over €2 billion in the half-year but the underlying loss deepened by 30% to €143.7 million. The main reason for this was a €24 million financial impact from the higher than usual sickness levels in TUIfly Germany, where many pilots called in sick last October amidst a dispute, resulting in many flight cancellations.

More positively, TUI Germany delivered an improvement in its trading performance, with market share gains and an increased range of holidays and departure airports, the group noted in its half-year report. The result from aviation was impacted by additional aircraft repair costs as well as the timing of Easter.

Prospects for the summer 2017 are looking good for the German market leader. TUI has a 7% increase in revenues for summer 2017, based on a 4% rise in customer numbers and a 3% improvement in average selling prices. The company has now sold 62% of overall capacity for this summer.

The revenue increase is well ahead of the 3.2% growth in summer sales for the overall German package holiday market (as of end-April), which market researchers GfK calculated from their latest monthly analysis of travel agency sales.

Overall, TUI said that current trading for summer 2017 is in line with expectations. Trading revenue is 8% ahead of prior year at group level, with customer numbers up 4% year-on-year. Lower demand for Turkey and Egypt is being offset by greater demand for Greece, Spain, Cape Verde, Cyprus and long haul destinations such as the Caribbean.

Commenting on the group’s half-year financial performance, CEO Fritz Joussen said: “Our transformation to an integrated tourism business is on track. We are delivering strong growth in our hotel and cruise brands. These two segments contribute half of our operating result on a full year basis. The TUI Group is changing quickly – our guidance remains unchanged despite a challenging environment. We reiterate our guidance to deliver at least 10% growth in underlying EBITA this year.”

However, Joussen was unable to say when the planned joint venture between TUIfly and Niki might take off. He said talks with the European Commission over the venture are continuing but left it open whether the airline might launch in winter 2017/18 or next summer. The airline holding was originally planned to be ready to launch in summer 2017.

But the TUI CEO reiterated the advantages of the planned airline venture. “It’s a win-win situation for both parties,” he said. In addition, the overall German leisure airline market would profit when over-capacity “gets sorted out a bit”.

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