The tourism industry could recover faster than expected

Frankfurt Looking back, it may wake up some Tui investors. The travel group, which has been hit by the pandemic, hasn’t come out of the red in the past quarter. Adjusted loss before interest and taxes (EBIT) was 329 million euros after minus 633 million euros in the same period last year. The bottom line is a combined loss of 321 million euros.

But the quarterly report presented by Tui president Friedrich Goosen on Wednesday morning also contains some good news. Sales from January to March were 2.1 billion euros, seven times more than in the second quarter of 2021. “We expect a significant positive operating result for the year as a whole,” the director said with confidence.

Such optimistic promises are typical of a Tui chief. But there is much to suggest that Goosen can meet his ambitious expectations. The tourism industry is about to make a comeback.

A current survey conducted by the European Tourism Association (ETC) shows that there is a strong desire to travel in Europe. Three out of four people then stated that they would like to travel in the next six months, primarily to Mediterranean destinations. The survey was conducted in ten countries in March. The war in Ukraine was already raging.

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The desire for vacation is reflected in the current figures of Tui. Josen said bookings have been above pre-crisis levels in the past six weeks. In Great Britain, the current value is up by 11%, and the number of bookings in Germany has increased to 135% in the past few days compared to what it was before the crisis.

Lufthansa has also reported high booking numbers

Tui isn’t the only one feeling the need to take a break. Lufthansa also reported strong demand for airline tickets. “Fortunately, the fading pandemic has finally allowed for more in-person encounters again,” CEO Carsten Spohr said Tuesday at the company’s annual general meeting.

This year, Lufthansa wants to complete 75 percent of its regular flight offer again, and by 2023 it should be 95 percent. The current numbers are so good that Spohr no longer rules out reaching the numbers the group was able to achieve before the pandemic before 2025, but before that.

>> Read about this: Lufthansa Spohr chief wants to reach full capacity before 2025

So the airline Condor plans to spend the next winter. The airline wants to serve long-haul routes from Dusseldorf and Munich again. You have to go far to destinations like Punta Cana or Cancun. Condor president Ralph Teckentrupp describes people as “vacation-hungry”.

The situation is similarly good in the domestic travel industry. According to the Federal Statistics Office, the number of overnight stays in Germany increased by 175.7% to 25.1 million in March compared to the same month last year. This value is about a quarter lower than it was before the crisis began.

Palma de Mallorca beach

Three out of four Europeans want to travel in the next six months, primarily to Mediterranean destinations.

(Photo: IMAGO / Chris Emil Janssen)

“The industry can look forward to Whitsun’s business and summer with confidence. There is a good pre-booking situation in many destinations,” said Norbert Kunz, director general of the German Tourist Association (DTV), at the start of the week.

Concerns about the impact of inflation on travel budgets

However, it is unclear whether the current boom will continue or whether it will fundamentally catch up two years after the pandemic. ETC explicitly notes that while many people want to travel, only 25 percent have actually fully booked their vacation.

President Tui Joussen has not yet noticed any significant impact of the war in Ukraine. The concern in the industry is that people are keeping their money together and spending less on travel due to the sharp increase in inflation. “We’re monitoring this closely,” Josen said.

For now, however, customers will continue to book longer holidays and higher classes. Last winter, Tui achieved prices 13 percent higher on average, and in summer prices were 20 percent higher. The British market, where winter bookings can already be made, has shown that this trend continues so far. “Rising prices offset higher fuel costs, for example, so we’re also confident in our ability to deliver a positive result for the full year,” Josen said.

TUI plane

Last quarter, the travel group generated sales of 2.13 billion euros, nine times more than in the same period last year.

(Photo: Reuters)

A recent survey by travel platform Skyscanner confirmed the trend towards more vacation spending. “49 percent of respondents plan to spend more this year,” said Naomi Hahn, the company’s director of strategy. This may be a reaction to lost travel time and vacations canceled over the past two years. On the other hand, in the latest ETC survey, the percentage of people who are willing to spend a little less on holidays has slightly increased.

The period between April and October is the most important for tourism. This is where she makes her money. The industry can really use the boom. This can be seen in the example of Tui. During the pandemic, the state absorbed the collection in several steps for a total of 4.3 billion euros. The mountain of debt that has accumulated as a result must be paid off. Last but not least, investors are waiting for it, and they have to restore their trust in the company.

The company is making progress. The group managed to reduce its net financial debt from 5.1 billion euros to 3.9 billion euros at the end of March. Available liquidity was 3.8 billion euros at the end of March, although Tui returned an unused initial credit line of 700 million euros to the state.

At the same time, the group managed to generate a cash flow of 439 million euros in the first half of the year. This means that Tui did not burn any more money in the first six months of the compensated fiscal year. In the first half of the previous year, the alleged cash flow remained negative at minus 1.47 billion euros. At the same time, equity at the group level is no longer negative, now it is 216 million euros.

Joussen recently announced in an interview with Handelsblatt that he intends to return more lines of credit to the state. This should reduce the interest burden. So far, the company has transferred about 280 million euros to the federal government for interest and the provision of lines of credit. Wednesday’s news was well received in the stock market. After Tui’s stock initially turned negative in the early morning, the newspaper was slightly positive in the morning.

more: ‘It will be more profitable than it was before the crisis’ – President Tui Joussen wants to return more government loans

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