TUI took another step toward sharpening focus on mass-market hotel and cruise brands with the disposal of its adventure-travel unit as Europe’s largest tour operator spelled out a strategy to attract new customers from markets like southern Europe and China.
The stock rose to a 13-month high.
TUI agreed to sell Travelopia to private-equity firm KKR & Co. for an enterprise value of €381 million. The company outlined an expansion target Tuesday for countries such as Spain, Portugal and China to add 1 million customers and €1 billion to annual revenue by 2022.
"The TUI 2022 program is targeted to the countries where we don’t have tour operating activities today," Chief Executive Officer Fritz Joussen said on a call with reporters. "We are looking at countries where we have increasing middle classes, so strong growth, but where we have high synergies as well."
The company is expanding hotel and cruise operations and adding destinations as travellers shun traditional holiday hot spots such as Turkey because of terrorism attacks. Countries including Bulgaria, Croatia, Cyprus and Portugal are reaping some of the fastest growth in bookings for next summer, rival Thomas Cook said last week.
To limit the risk of "a bloody nose" that other companies have suffered when pushing into China, TUI will focus on web-based services to fulfill its five-year growth plan in new markets such as that country and India, Joussen said.
Travelopia comprises more than 50 specialist brands including sailing adventures, private jet travel and polar expedition cruises. The sale of the UK-based division is expected to be completed in the second half and result in a non-cash charge of 133 million euros. Proceeds from the deal will mainly be invested in hotels and cruise brands, Joussen said.
TUI has been disposing of or closing businesses that don’t fit with a strategy of filling its own hotels, aircraft and cruise ships that are geared toward sun-and-sea tourism. The sales have included TUI’s Hotelbeds and MalaPronta online reservations units and web-based travel agency LateRooms.com. TUI has also cut its stake in container shipping company Hapag-Lloyd AG. Even with recent gains in Hapag’s share price, TUI is in “no rush” to sell more of its holding, Joussen said Tuesday in Hanover, Germany, where the company is based.
Earnings Improvement
Excluding discontinued operations, TUI’s underlying loss before interest, taxes and amortisation in the first quarter ended 31 December, a seasonally slow period, narrowed to €60.3 million from €80.4 million a year earlier, the company said Tuesday. Revenue rose 2.3 percent to €3.29 billion. The company reiterated a forecast that full-year underlying earnings will rise at least 10 per cent.
Tours for the coming summer travel season are 35 per cent sold, with bookings up four per cent and revenue up nine per cent as tourists paid higher prices, Joussen said on the call.
Standard & Poor’s upgraded TUI’s long-term debt by one level to BB, two steps below investment grade, from BB- as "operating margins continue to rise for the sixth year" despite challenging conditions in industry, the credit-reporting company said Tuesday in a statement.
News by Bloomberg, edited by Hospitality Ireland
