Revamped Travel Giant: TUI Soaring High After Coronavirus Slump
TUI, Europe's largest travel company, has bounced back spectacularly from the coronavirus pandemic, reeling in record profits and seeing skyrocketing bookings. Emphasizing high-end offerings and strategic initiatives, TUI aims to dominate the travel sector once again.
The summer season brought spectacular results, with TUI outperforming expectations and more than doubling its operating profit compared to pre-pandemic times. The company's optimism for the coming year is undeniable, predicting at least a 10% increase in revenue and a 25% surge in earnings. TUI CEO Sebastian Ebel believes that the tourism industry's endurance is evident in these promising figures.
TUI's ambition is clear: to profitability, efficiency, and boosting its market presence across all segments. As a result, discussions around a delisting from the London Stock Exchange and listing on the Frankfurt Stock Exchange's Prime Standard, along with potential entry into the MDAX, are underway.
TUI's clientele remains unaffected by inflation, as the company focuses on premium offerings where demand remains steadfast. The less expensive market segment has faced difficulties, with prices leveling out after initial turbulence. Despite a brief dip in bookings for winter destinations in Egypt due to the conflict with Hamas, TUI has recovered, reporting 13% more bookings and a 4% price boost. The company is confident about a strong summer season ahead.
TUI's hotel and cruise sectors are set for expansion, with its hotel division (Riu, Robinson, Tui Blue) recording an occupancy rate of 80% and a 5% uptick in per-bed prices. Meanwhile, TUI Cruises, Hapag-Lloyd, and Marella lines collectively boosted the cruise sector's adjusted operating result by 40%.
The company's traditional tour operator business, however, was in the red due to increased marketing, IT, and integration expenses associated with low-cost airline Ryanair. Yet, TUI is resolute in repaying the aid it received during the pandemic to manage its debt.
In summary, TUI's post-coronavirus resurgence has been noteworthy. Its concentration on premium offerings, strategic initiatives, and financial management have fueled its impressive growth in revenue and earnings. The company's dedication to debt reduction and market positioning positions it as an attractive investment opportunity, even in the face of challenges in specific market segments.
Insights:
Financial Performance
- The hotel division's key brands, such as Riu, Robinson, and Tui Blue, have generated a substantial profit of 150 million euros in the previous quarter with an 80% bed occupancy rate and a 5% rise in per-bed rates to 94 euros.
- TUI Cruises, Hapag-Lloyd, and Marella lines contributed to the cruise sector's growth, boosting its adjusted operating result by 40% to 48 million euros.
- The traditional tour operator business suffered losses due to marketing, IT, and integration expenses, resulting in an adjusted operating loss of 125 million euros.
- Delays in receiving new Boeing aircraft have prevented TUI from receiving its anticipated 16-19 planes, forcing it to operate with more expensive older aircraft.
- Debt reduction is TUI's main priority, with the company aiming to reduce its debt through higher profits and efficient financial management.
Strategic Plans
- Post-pandemic, TUI introduces a 10-point safety plan for its hotel operations, focusing on organization, capacity planning, hygiene measures, and staff training.
- TUI projects 16% annual revenue growth and 4.1% EPS growth, aiming for a 42.1% ROE in three years.
- TUI's management remains committed to efficiently managing its debt, with a goal of reducing the debt burden through greater earnings and internal financial management.
Stock Market Plans
- TUI targets a potential revenue of 26.476 billion euros and earnings of 858 million euros by 2027, with EPS growth of 13.6% per annum.
- TUI invests in both its hotel and cruise sectors to boost adjusted operating profit by 7-10% and cultivate growth.
- Despite challenges, TUI's diversified portfolio and strong market position present an investment opportunity, with the CEO viewing the company's growth as 'on the way.'
