Destinations

European Tour Operator TUI Forced to Rethink French Market After Arab Spring

Aug 07, 2013 7:54 am

Skift Take

Overall, the European market is doing better than it was a few years back with political turmoil outside of the region being the biggest obstacle to booking growth.

— Samantha Shankman

Free Report: The State of Student Travel


TUI Travel Plc, Europe’s largest tour operator, fell the most in more than a year after political turmoil in northern Africa kept French customers from taking trips to the region.

TUI will continue reshaping its offerings in France “with far less emphasis on North Africa” after summer bookings from the country fell 22 percent through July 28, a quickening pace from a 15 percent drop through May 5, the Crawley, England-based company said today in a statement.

The shares fell as much as 5.7 percent, the biggest intraday drop since May 2012, and were down 4.3 percent at 384.4 pence at 9:57 a.m. in London.

“The political unrest that started about two years ago, the Arab Spring,” has diminished the popularity of North Africa as a tourist spot, said Mike Ward, a spokesman for TUI Travel.

Troubles are persisting in Tunisia and in Egypt, where Islamist President Mohamed Mursi was toppled on July 3, while his supporters have refused to end street protests demanding his reinstatement. At least 130 Mursi backers were killed by security forces in Cairo last month, and governments including Germany and the U.K. have issued travel warnings.

TUI Travel’s stock decline came as the company reiterated a forecast for full-year underlying operating profit growth of at least 10 percent, excluding currency swings. Revenue in the mainstream business in the U.K. increased 11 percent through July 28 from a year earlier and advanced 10 percent in the Nordic region, as both customer numbers and prices rose.

Bookings Decelerate

Even so, summer sales bookings weakened heading into summer, with business in top European markets decelerating since the first half, according to James Hollins, an analyst at Investec who maintained a hold recommendation on the stock. “There may be disappointment at guidance not being raised more,” reflecting a weakening of trading, he said in a note.

Summer customer numbers in the company’s mainstream business declined 2 percent through July 28, after holding stable at the prior year’s level as of May 5, TUI Travel said.

“Across Europe and the Nordics, the overall environment is good, with the exception of France, which is very weak, and that’s probably likely to stay, and that’s what we are assuming in our plans when we look at the French business,” Chief Executive Officer Peter Long said on a call with journalists.

Today’s decline pares the gain for this year to about 35 percent, making TUI Travel the second-best performer in the 10- member Bloomberg Europe Leisure Time Index, behind Thomas Cook Group Plc.

With assistance from Robert Wall and Heather Burke in London. Editors: David Risser and Tom Lavell.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net. To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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