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Owning Hotels and Ships Proves Good Business for TUI

Skift Take

TUI AG owns or leases a half dozen hotels and resorts, including RIU, Robinson and Iberotel, and saw this unit’s profits climb 32% in the past nine months. Why bother contracting with third-party hotels when you can fill your own rooms at hefty margins?

— Dennis Schaal

TUI AG, the owner of Europe’s largest tour operator, lifted operating profit 89 percent as it cut costs, raised prices and improved hotel booking levels.

TUI’s adjusted earnings before interest, tax and amortization rose to 163.4 million euros ($218 million) in the fiscal third quarter through June 30. Occupancy rates at its Riu hotels rose 3 percentage points and added 2 points at the Robinson “club” brand, with prices up at both. Average prices in the cruise business rose 7 percent, the company said.

TUI is adding ships and hotels as Chief Executive Officer Fritz Joussen seeks to double the number of customers within five years, while merging with TUI Travel Plc, the leading European tour operator in which it already has a majority stake, to form the holiday industry’s No. 1 player. The German company, based in Hanover, is cutting costs and reviewing activities to improve capital returns as it seeks to convince TUI Travel shareholders a merger will be beneficial for them.

Three-month sales rose 3.1 percent to 4.83 billion euros, the company said in a statement today, predicting that a gain in annual earnings will be “at least at the upper end of the target range,” which calls for operating profit to advance by 6 percent to 12 percent in fiscal 2014.

“We are delivering growth in all sectors and are increasing our profitability, through our own efforts,” Joussen said in the release.

TUI Travel Plc said Aug. 8 that third-quarter profit rose 21 percent to 92 million pounds ($155 million), adjusted for currency swings and the timing of Easter, as package-tour prices rose and more clients booked online.

To contact the reporter on this story: Richard Weiss in Frankfurt at [email protected] To contact the editors responsible for this story: Benedikt Kammel at [email protected] Christopher Jasper

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