Scaling up its tours and activities Musement business with its new online agent partners could help the travel giant recover from repeated blows to its core package holiday business.
Packaged holidays operator TUI’s first-half results hammered home the severity of the pandemic: revenue was $868 million for the six months to March 31, 2021, compared with $8 billion in the same period last year.
But CEO Fritz Joussen is optimistic, with 2.6 million bookings pencilled in for this summer (still 69 percent down on the same period for 2019).
The hope isn’t wholly unfounded, because new bookings grew 256 percent in the past five weeks. But it might end up disappointed in the UK. Three months ago, Joussen said more than half of TUI’s bookings came from the UK, and that the successful vaccine roll-out meant there was “a strong indication that summer bookings will happen.”
It’s only really Portugal that stands to deliver the goods later this month, with the country making the UK’s long-awaited “green list” on May 7.
TUI’s bookings to Portugal and Madeira almost tripled just after the announcement. Comparing the weekend of April 30-May 2 to that of May 7-19, sales rose 182 percent.
Other approved destinations included the likes of Singapore, Brunei and the Falkland Islands — hardly bucket-and-spade favorites.
The UK’s list will be reviewed in two weeks.
The company was keen to point out that unlike its 2020 financial year, these six-month results fell squarely under full pandemic restrictions. But “the engines are running,” said TUI CEO Fritz Joussen, speaking during an earnings call on Wednesday, referring to the fact that the company didn’t close during the pandemic.
Due to lower sales, it racked up a $1.58 billion loss for the period, nearly double the $964 million loss reported in the 2020 first half.
The company now hopes that rising vaccination figures and “test concepts” will lead to a safe tourism restart across Europe. One of those tests involved a pilot project by TUI and RIU with the government of the Netherlands. Some 60,000 travelers registered in a single day for 180 places available.
“This shows the relevance of holidays and the anticipation of returning to more normality and freedom to travel in these weeks,” the company said.
A New TUI
The company’s digital transformation continued during the pandemic, Joussen said, and that includes its tours and activities platform Musement.
Like its holidays, the numbers plummeted. It sold just 141,000 excursions and activities in the first half of its 2021 financial year, down 90 percent on the prior year’s period. It made a loss of $75 million, which was a decline of $40 million.
However, online distribution was 50 percent, increasing from 21 percent in the first half of 2020, due to the integration of Musement’s inventory into the main TUI app.
It now expects growth from its new partners.
“We’ve opened the platform to third-party activities. Our mission is to be the best activity marketplace,” Joussen said. “Booking.com and Trivago are using our platform for their customers. This is good because we have additional audience, and we consolidate the market even more, but also it’s interesting because many of these customers are not traditionally beach customers. They are city customers.”
Now, TUI has an opportunity through this new customer base to grow sales of tours and activities in cities, where TUI’s traditional sun-seeking customers “would not be very helpful,” he added. “It’s a full ecosystem of activities we’ve been building, the technology is there. Now of course we need some customers.”
It’s still uncertain how many customers will be able to get away this summer, or want to, but those that do are paying more. TUI said average sales prices were up by 22 percent, as more people were upgrading their holidays to four and five-star properties, and booking longer stays.
TUI also carried out a survey, with 70 percent of respondents saying they wanted to go on holiday. “England in particular offers potential when new travel corridors to southern Europe open there too in the next few weeks,” Joussen said. “European destinations, particularly Greece, Canaries and Balearic Islands, are ahead in preference.”
The bad news is that summer’s fast approaching, and time is running out. As of May 7, 2021, TUI had cash and cash equivalents of $2 billion.
“It’s important we catch the wave,” the Joussen said.
Photo credit: Albufeira, in Portugal's Algarve region, will likely see lots of Brits this summer. Dan Gold / Unsplash