As TUI hits records for revenue, the tour operator highlighted its growing use of dynamic packaging and its increasing direct inventory deals with low-cost airlines and hotels.
TUI Group surpassed earnings expectations in the first quarter of 2024 with the help of a surge in demand for holiday experiences like cruises and the increasing use of dynamic packaging.
TUI saw record revenue of $4.6 billion (€4.3 billion) in the quarter — a 15% rise from the same period last year, despite the usual winter travel lull.
“In a persistently challenging environment, people’s high willingness to travel ensures strong economic development in all areas of the group,” TUI’s CEO Sebastian Ebel said.
While almost all travel segments contributed to the uptick, the company’s “holiday experience” segment — which includes hotels, resorts, cruises and activities — played an outsized role in increasing revenue.
TUI’s management attributed some of the results to investing in dynamic packaging options during booking.
Cruise revenue increased by 44.7% from last year and hotel revenue increased by 19.3%. Both saw a significant rise in rates and capacity.
“We are almost at the 100% we are used to seeing when it comes to occupancy,” Ebel said in a press call on Tuesday morning. “So this is a very very good development.”
TUI Musement, the experiences division of TUI Group, found similar trends. Musement showed a 16% increase in the number of experiences sold during the same period last year.
The increase in experience-based bookings might also be a result of TUI’s focus on new deals and offerings that prioritize bespoke customer booking processes.
TUI also plans to develop direct relationships with low-cost airlines and hotels to improve their connection with customers. Having inventory direct from suppliers can aid in customer service.
Momentum for dynamic packaging
In May 2023, the company announced plans to test dynamic pricing for travel packages in the UK, giving customers more flexibility to package flights, accommodation, and experiences separately while keeping all their plans within one booking.
In the past nine months, it has increased sales of dynamic packaging.
“What is really important for us is that we have increased the share of dynamic packaging — an area which we identified as one of our growth sectors,” said Ebel on Tuesday. “The momentum is there. It’s a very strong pillar.”
While management didn’t mention specific figures, Ebel said that dynamic packaging has grown by 25% and has done especially well in the United Kingdom.
The Group is also making an effort to reach customers more directly.
In January, TUI Musement signed a new contract with European low-cost carrier EasyJet that allows customers to add experiences to their flights and holiday packages.
TUI is working to streamline the travel booking experience by developing more direct partnerships with low-cost airlines and hoteliers. This effort is also meant to improve their performance and “close gaps” with competitors. Though Ebel would not confirm which low-cost airlines TUI is in discussions with, he suggested that we could see new deals in time for this summer.
“There are a lot of airlines where we don’t have the direct connection [with consumers] — where we go through the live ticketing of Amadeus and so on,” said Ebel. “It’s our clear target to link directly to the hotelier and it’s our target to link directly to the airline … and there’s a lot to do. But we can improve our situation and competitiveness if we go direct.”
TUI Group is capitalizing on this surge of interest in experiences and positioning itself in new segments of the sector. In November, the Group announced the launch of their first luxury hotel brand, The Mora, to open in Zanzibar in November.
“We’re very proud of what has been achieved in hotels and resorts,” said Ebel. “To add this luxury hotel brand to our portfolio… we are really, really looking forward to it.”
Next quarter, it expects to see an uptick in revenue, but not quite to the same magnitude as FY2023, partly because this year’s earnings were compared to the currency volatility occurring at the same time last year.
TUI anticipates a rise in operating profit of at least 25% in the 2024 financial year.
While the UK remains one of its most promising markets, the market in Poland is doing “outstandingly well,” Ebel said. TUI has plans to expand its offerings there and to the Czech Republic, as well as in Spain and Portugal. It intends to move into Italy this year before spreading further to the Americas and Asia.
“Travel is the priority of consumers,” said Ebel. “It’s very stable and probably more stable than we anticipated before.”
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Photo credit: A view of a ship from the Mein Schiff TUI Cruise fleet, which offers excursions through Norway’s coasts and port cities in the north. (Photo by Mathias Kokartis of Cruise Vision. Source TUI Group.