Unleashing the Traveling Spirit: Tui Sees continued Growth Post-Pandemic
The world's largest travel conglomerate, Tui, is basking in record-breaking sales following the pandemic and has now entered a phase of financial prosperity. During a recent financial presentation, CEO Sebastian Ebel expressed optimism about future growth in earnings, customers, and revenue. However, he indicated that the time for exorbitant price increases has passed.
A welcome relief from inflation’s grip, the travel costs are now returning to normality, according to Ebel. For the upcoming summer season, German travelers can anticipate a minimal average price escalation of 3%, although the exact prices may vary by destination. Some regions like Greece, which has experienced higher inflation rates, might show a price increase of up to 5%.
Tui reported a remarkable milestone for the financial year ending in September 2022, registering sales of 20.7 billion euros, surpassing the 20 billion euros mark for the first time since the Hapag-Lloyd container shipping company sale. This notable increase translated to a 25% increment compared to the previous year. The enhanced earnings could be attributed to the 5% average price hike per trip and a 13% uptick in the average revenue per bed and night in the hotel sector, which stood at an average of 87 euros.
These improvements resulted in a substantial operating earnings before interest and taxes surge from 409 million to 977 million euros when adjusted for special items. This impressive enhancement led to a financial surplus of 306 million euros attributable to shareholders in the twelve-month period ending in September 2022, markedly contrasting the 277 million euros deficit recorded in 2021.
Confident in the new financial year's foreseeable prospects, the Management Board projects an unprecedented growth. The financial outlook anticipates an increase in revenue by at least 10% and an operating profit escalation by at least 25%, placing the collective revenue at over 1.2 billion euros, even surpassing the 2018/19 financial year's earnings without the Boeing 737 Max impact. The flight ban for the medium-haul jet had previously hit TUI earnings by around 300 million euros.
Ebel projects that approximately half of the anticipated revenue growth in 2024 would stem from an influx of new customers. This ambitious expansion strategy targets untapped markets beyond Germany. The TUI CEO clarified that the company has not witnessed any price-sensitive reluctance from customers. However, the lower-price segment market has grown more competitive. Tui primarily specializes in offering premium-tier four and five-star hotels.
The CEO is optimistic about the current winter business, with 56% of the winter program already sold. Fortunately, the Hamas terror attack in October 2023 only temporarily affected bookings, showing a resilient traveler sentiment for Middle Eastern destinations. Assuring normalcy, Ebel anticipates Egyptian tourism to recover by Christmas 2023.
Additional Insights:
Evidently, rising inflation is affecting travel prices across various European destinations. In some regions, prices have escalated by more than 11.5% year-on-year. However, Germany's specific inflation dynamics, such as the decline in energy costs, provide some relief to travel expenses when traveling within Germany.
On the bright side, this trend indicates that European destinations, including Greece, could still attract tourists, as the overall demand for TUI's services remains strong, and the company is strategically well-positioned to manage the price increases.
In conclusion, the material advancement in the travel industry signals an encouraging outlook for TUI as the company anticipates robust demand and growth to continue post-pandemic.
