Yahoo Finance FTSE: TUI back in profit as holiday prices rise
Winter holiday prices have surged 23% on pre-pandemic on TUI (TUI.L), as the travel operator announced a return to profit.
Europe’s largest holiday company reported revenues of €16.55bn (£14.24bn/$17.62bn) in the year to September 30, up from €4.73bn the previous year.
It also returned to profit, reporting underlying pre-tax earnings of €409m, surging upwards from heavy losses of €2.08bn suffered this time last year.
Read more: UK wages fall by 2.7% as unemployment rises
Prices are up 23% between October 2022 and March 2023 compared with the same period in 2018-19. An increase amid a cost of living crisis that has not stopped travellers, with UK sales 5% ahead of where they were before the COVID crisis.
Tui chief executive, Sebastian Ebel, said: “People are more cautious where they spend their money. We are finding that people tend to make a decision on the budgets they have.
“So, if £1,000 is not enough anymore to go to Spain, then they go to Turkey. Or if they decide in winter not to go to the Dominican Republic, then they go to Egypt.
“We will see more normality compared to last year, where there was a strong increase in duration and a strong increase in star ranking.
“After COVID, people wanted to go on longer holidays and stay in a five-star rather than a four-star hotel. So here, we do expect a normalisation to times pre-COVID.”
The business also noted a trend for short-term bookings following the pandemic, signalling that consumers are avoiding booking holidays well in advance due to the uncertainty of international travel.
Ebel added: “After two-and-a-half very challenging years in the wake of the global COVID-19 pandemic, the past financial year was marked by a recovery of our business.
“As a result, we were finally able to report a positive operating result again.
Read more: UK economy returned to growth in October with 0.5% rise in GDP
“Tourism remains a long-term and attractive growth sector. All fundamental data point to this, and the long-term megatrends from which our industry particularly benefits remain intact.
“We also expect 2023 to be a solid and good year, but we are very aware of external market factors.
Still, in its report, the company warned that the business environment remains “challenging” due to the war in Ukraine, the ongoing impact of the Covid pandemic, inflation and high energy prices.
The firm provided 7.6 million holidays in the peak summer months, down 7% compared with the same spell in 2019. Tui flights flew 92% full but flight disruption, particularly in early summer, cost the firm €58m.
TUI also said it planned to repay COVID support through a capital raising next year, which caused shares to plummet.
Richard Hunter, head of markets at Interactive Investor, said: “Inflation, disruptions, labour shortages and competition from lower-cost operators which could well capture the imagination of cash-starved consumers could all provide headwinds.
“One swallow does not a summer make and investors will need to see evidence of an established trend before warming to the prospects of the company.”
