TUI Places Hopes on Vaccinated UK Travelers to Drive a Summer Recovery

Tour operator TUI is relying on the UK, its biggest market, to lead a bounceback this summer, and predicts growth for its Musement activities app, following a dismal 2021 first quarter.

For the three months to Dec. 31, 2020, TUI’s fiscal first quarter, the group reported an underlying loss of $1.21 billion. In that quarter it received another loan, worth $2.18 billion. So far, its bailouts come to almost $6 billion.

For the next quarter it estimates it will burn through $302 million to $363 million per month, and it has $2.5 billion in the bank to see it through until the summer.

Recovery now rests largely on pent-up demand, and its CEO hopes the UK will continue what’s been a strong start to its vaccination rollout, with almost 11 million people already receiving their first jab.

“Because we have more than half of our bookings from the UK, that is definitely very helpful,” said Fritz Joussen during an earnings call on Tuesday. “This year there’s a strong indication that summer bookings will happen.”

Death of the Discount

For anyone expecting a bargain package holiday with TUI this year, don’t. The operator said that some destinations had already removed any early discounts.

“We don’t need to have a lot of discount,” Joussen said. “For our Robinson Clubs, we’ve actually just removed the early discount, because we see these products are already filling up for the summer.”

Meanwhile, many hotel investors are looking beyond the crisis, so prices are more stable, with Greece and Spain holding up in particular.

TUI already has 2.8 million customers booked for the summer season, which represents 80 percent of capacity. The tour operator would also be able to expand this, using its planes and third-party capacity, if demand increased.

Average prices, meanwhile, have risen by 20 percent, Jouseen added, because people were “trading up” to higher quality breaks after almost a year of lockdown.

At the end of December, 116 hotels were open, compared to 229 open hotels at the same time last year, with tourists mostly heading to Greece and the Caribbean, rather than its other winter destinations such as the Canaries and Maldives.

TUI is also continuing its “global realignment programme,” launched in May last year. It wants to shed 8,000 full-time jobs overall, and so far has reduced 5,000. It is targeting savings of $485 million per year by 2023.

Digital Future

TUI Musement, its tours and activities app, falls under that realignment and the tour operator now wants to fully integrate the platform, which it acquired in 2018, into the TUI app. This would then help it to sell more in-destination activities, and offers live transfer times, chat and maps, plus check-in for its own hotels.

However, the amount of excursions and activities fell to 75,000 in the first quarter, a 95 percent drop compared to the same quarter in the prior year. The division reported an underlying loss of $40 million, down $30 million on the prior year.

“We can start selling activities,” Joussen said. “The Musement tours and activities segment is actually one of the promising segments right now. We have more than 170,000 activities in 100 countries, and exclusive discounts.”

Musement will soon allow users to share content with their community, and write reviews, he added, while David Schelp, CEO of TUI’s tours and activities business unit, has said he’s not ruling out acquiring other activity players to expand its reach.

TUI has been significantly bankrolled over the past year, hit hard by the closing of Europe’s borders this winter. However, the UK market represents a real chance for recovery if Europe’s hotspots can welcome any tourists this year.