TUI Group used its full-year results to point to its future as a “platform”, while also reiterating its enthusiasm for blockchain technology.
The company maintained its guidance of at least 10% CAGR in underlying Ebita for the three years to full-year 2020.
CEO Fritz Joussen said: “We are investing, we are growing with TUI’s high-margin products and services and our businesses are increasingly scaling. Today, our own holiday experiences content account for more than 70% of our earnings: hotels, cruises, excursions and destination activities.
“This enables us to clearly differentiate ourselves from the competition. With more than 20 million customers, use of state-of-the-art IT and intelligent customer systems, we have considerable potential for new business, turnover and earnings.
“We will continue our successful transformation: The next step will transform TUI into a digital and platform organisation.”
Joussen told analysts: “Uncertainties are increasing, look at Brexit developments, look at the weather. The nice thing, our business model and transformation, seems to be not affected.”
Shares in the company rose by 4% on the news, in contrast to the poor response to Thomas Cook’s results last week. David Madden, market analyst, CMC Markets UK, said: “The travel sector across the board has had a difficult time as the unusually warm weather encouraged prospective holiday makers to stay at home. Given what has gone on in the travel sector lately, it was an impressive performance from TUI.”
The company said that it had seen growth in demand for Turkey and North Africa, with a normalisation in demand for Spain, including the Canaries. It said that it would continue to develop its portfolio of destinations and remained on track to open approximately 60 additional hotels since the merger by the end of full-year 2019.
Revenues were up by 5.3% to EUR19.5bn with underlying Ebita up 4.1% at EUR1.147bn. The company said that it expected to deliver at least 10% underlying Ebita growth in full-year 2019, with growth from investments, digitalisation and efficiency, “as well as our double-diversified business model, helping to mitigate market challenges”.
The company said: “The weakness of pound sterling resulting from the Brexit vote, prolonged air traffic disruption caused by French air traffic controller strikes and a prolonged heatwave in northern and central Europe impacted the entire sector and were also reflected in the operating result delivered by markets and airlines, which fell short of the previous year’s levels.”
The group has sought to diversify its holiday offerings and destinations as part of a wider strategy to reduce volatility in a seasonal business. Earlier this year Joussen told analysts on the group’s first-quarter earnings call: “Our strategy is successful. Our focus is on hotels and cruises. This makes TUI more profitable and we now generate our earnings more evenly across 12 months.”
Last month saw the group announced further expansion in the Mediterranean region, with 15 of its own-brand hotels, 12 of which will be the adults-only Sensimar flag.
TUI described Sensimar as a concept “for couples who appreciate tranquility and relaxation and are traveling without children.” The four- to five-star hotels are in beach locations and offer guests “a low-key sports and entertainment programme.” The portfolio includes 49 additional hotels in 13 countries.
Commenting on Brexit, the group said: “With regard to the UK’s exit from the EU in 2019, the main concern remains whether our airlines will continue to have access to EU airspace. We are currently developing scenarios and mitigating strategies for various outcomes, including a ‘hard Brexit’, depending on the political negotiations, with a focus to alleviate any potential impacts from Brexit for the group.”
Joussen added that he expected the UK market to “stay intact”.
TUI has started to use blockchain technology to manage its own hotel capacity so as to achieve optimum occupancy and improve profitability through its own yield management system.
TUI’s in-house blockchain works alongside its Cyrus yield system, controlling the group’s inventory. The company said it was also working on a common purchasing system across its operations and pointed to a future in which it saw a digitised and automated supply chain.
HA Perspective [by Katherine Doggrell]: Just as TUI was releasing its results, most-compared Thomas Cook said that it had not been fast enough in enacting its strategy and was going to have work to do in 2019.
TUI, in contrast, has been much with the strategy enacting and, while Joussen was quick not to smug it up too much, the company has many more levers to pull than Thomas Cook and is keen to pursue the platform play.
Both companies are keen to leverage their much-established brands, honed on the high street, and this is now where they’re looking to provide a point of differentiation, competing as they do with both the operators and the OTAs. How they respond to what next summer brings will be key.