TUI thrives as Brits keep holidaying

You can take our strong pound, you can take our cheap credit... but you'll never take our summer holidays.

by
Last Updated: 31 Aug 2010

Travel operator TUI bucked the general gloom this morning by reporting a 9% jump in revenues to £3.6bn during the three months to June. TUI racked up profits of £65m (a 39% increase) as consumers refused to let the credit crunch or the soaring euro deter them from that prized fortnight in the sun. And TUI says it can see no sign of a slowdown – bookings are apparently well up right into next year…

TUI Travel, the company formed last year by the merger of German company TUI and UK business First Choice, is clearly proving more downturn-proof than most. Bookings last quarter were up 5% on last year, and there’s no indication that its customers are trading down to cheaper options – the average price paid for its package holidays was apparently 13% higher than last year. Nor does it appear to be a one-off – Thomas Cook was similarly upbeat yesterday (although it did suggest that we’re passing on weekend breaks to save up for longer holidays).

Not even the rising oil price has really dented TUI’s figures. Since it operates so many charter flights, you would have expected the travel operator to have been feeling the squeeze as oil topped $140/ barrel. But apparently not; this is partly because it’s passed extra costs onto customers, of course, but it’s also because the euro’s rise against the dollar has made it cheaper to buy the black stuff from this side of the Atlantic. So while it might make eating out a bit pricier when you get to your sunnier climes, the higher cost of exchanging euros isn’t all bad news.

TUI reckons the outlook for the next 12 months looks pretty good too – it said bookings for this winter and next summer ‘have started positively’, with average prices up by 8% and 12% respectively. A ‘delighted’ CEO Peter Long said today: ‘Our customers continue to place enormous value on their holidays, and we are seeing no evidence to suggest that demand is slowing for any of our seasons on sale’.

Although the merger seems to be progressing pretty well – apparently TUI is well on track to deliver the £80m of cost savings forecast for next year, a sizeable chunk of its eventual £150m target – Long is still planning to take a cautious approach in the coming months. He’s reducing capacity in the UK and Germany by 15% and 6% respectively, just to be on the safe side, and has hedged the group’s exposure to oil and currency price changes.

But we reckon he needn’t worry – it’ll take more than a pesky credit crunch to stop us trying to escape the British weather every summer...


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