TUI profits as holidaymakers hunt for bargains

Holidaymakers are plumping for last-minute deals rather than ditching their summer getaways, says TUI.

by
Last Updated: 31 Aug 2010

TUI Travel, the holiday operator that was once First Choice and Thompson, said today that demand for its summer breaks have held up well, despite the economic gloom. The company’s quarterly results weren’t exactly awe-inspiring – revenues were fractionally down year on year – but they did benefit from credit-crunched jetsetters signing up for summer holidays at the last minute. Perhaps they got sick of waiting for that ‘barbecue summer’ promised to us by the Met Office…

Either way, it saved TUI’s bacon: thanks to this flurry of late bookings, the travel operator more or less managed to hit its sales targets, with revenues down just 1%. And the good news is that this trend of booking up holidays at the last minute is likely to continue, according to chief executive Peter Long. Better still, operating profits were 57% up on this time last year, which is presumably largely due to the group’s cost-cutting efforts over the last 12 months. As part of TUI’s integration process (since it was formed by the £3bn merger of Thompson and First Choice a couple of years ago), Long has been busy 'identifying synergies' – or chopping a load of jobs, as it’s more commonly known.

Unfortunately for TUI, it may not be laughing in the face of the recession for too much longer. The company also revealed that winter bookings are currently down a dismal 21%, although they have reportedly picked up a bit in recent weeks (perhaps coinciding with the Met’s retraction of its rosy forecasts for August). Adding to Long’s woes, it seems the swine flu outbreak has dented TUI’s bottom line – holidays to Mexico are drastically down on last year’s figures, losing TUI an estimated £7m. Long has responded by slashing 15% of the operator's flights to reflect its dreary predictions, while a price increase of 9% will hopefully make up some of the shortfall.

The results also showed that not all Europeans are as steadfastly committed to their summer holidays as us Brits. In the Netherlands, bookings were down 14% compared with last year, while the French also seem to be embracing the trend of ‘staycationing’ – bookings across the Channel dropped 10%.

News that a tour operator like TUI is bearing up reasonably well may come as a surprise to some – like the researchers at TheLadders.co.uk, who recently claimed that half of the 500 execs they questioned about their holiday plans were planning to cancel their summer vacations due to the credit crunch. Either they were telling porky pies, or TUI et al have benefited from a late change of heart...


In today's bulletin:

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TUI profits as holidaymakers hunt for bargains
Summer security provides window of opportunity
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