As Thomas Cook issues profit warnings, rivals TUI posts double digit growth for fourth year in a row
A rise in hotel and cruise bookings has helped European travel group Tui sail through another year with more than 10% growth in profits. It said next year, profits would grow a similar amount as customers also bought more excursions and holiday activities.
Tui has seen double-digit growth for the last four years. Last month, smaller UK rival Thomas Cook reported a loss of £163m, blaming warmer summer weather for lower numbers of bookings.
“Our own holiday experiences content accounts for more than 70% of our earnings: hotels, cruises, excursions and destination activities. This enables us to clearly differentiate ourselves from the competition,” said Fritz Joussen, Tui’s chief executive.
Tui Group posted a 10.9% rise in annual earnings, just ahead of analysts’ forecasts. The share price rose 5.5% following the news.
Tui said the “challenging market”, including uncertainty from Brexit and tough competition between airlines, had squeezed consumer spending. Earnings were nearly 15% lower for the group’s tour operator and airline business.
But there was strong growth in demand for cruises, hotels and holiday “experiences”, which together account for 70% of Tui’s earnings. The firm said customers were paying more for extra activities while at their holiday destination, such as jungle trails, city tours and cultural experiences.
The firm’s spokesman said the firm was benefiting from more targeted marketing of in-holiday extras, such as room upgrades and tailored excursions.
While in the past, a holiday rep might have offered the same range of activities to everyone in the hotel lobby on the first day of a holiday, they were now offering more targeted suggestions to customers during the period between booking and travelling.
He said the recent acquisition of Italian technology firm Musement was allowing Tui to use AI to market bespoke excursions, such as a French-language tour of the Colliseum for a specific date booked months ahead.
David Madden, market analyst at CMC Markets, said that the results amounted to a “very respectable set of full-year figures”, with this winter’s trading nearly matching last year’s level and an increase in the dividend going to shareholders.
“Given what has gone on in the travel sector lately, it was an impressive performance from Tui,” he said.
“Thomas Cook and Ryanair both issued profit warnings and Flybe have put themselves up for sale – so the sector is clearly under pressure.”