Tui forecasts summer holiday demand close to pre-pandemic level

Europe’s largest tour operator Tui expects summer bookings to be close to pre-crisis levels, with prices up more than a fifth from last year as consumers opt for more luxurious hotels and long-haul holidays.

The Anglo-German group had warned in December that the spread of the Omicron coronavirus strain would dent bookings, but on Tuesday struck an upbeat note as it revealed its losses had narrowed in the fourth quarter.

The removal of travel restrictions for vaccinated travellers in the UK had prompted a sharp uptick in bookings in its second-largest market, it added, with summer holiday reservations up 19 per cent compared with the same point in 2019.

Destinations such as the Caribbean and Cape Verde Islands were proving the most popular destinations, chief executive Fritz Joussen said. He added that he expected space at Greek island resorts this summer to be “scarce”.

Travel businesses across the world have borne the brunt of ongoing restrictions and border closures during the pandemic but Tui has suffered more than most as it operates across air travel, cruises and hotels, all of which have been forced to close to customers for extended periods since 2019.

Overall bookings for the winter season were at 58 per cent of pre-pandemic levels, showing that Omicron had impacted bookings marginally more than the company had expected. It had originally guided that bookings would be between 60 and 80 per cent of its 2019 winter season.

The group carried 2.3mn passengers on holidays in the final quarter of last year, compared to 3.6mn in the comparable period in 2020, it said. Revenues were €2.3bn, five times higher than in the same period in 2020 but still a third lower than pre-pandemic levels in 2019.

Tui’s loss before interest and tax in the quarter narrowed to €274mn from €676mn in the same period a year earlier.

Joussen said that he expected “a strong summer 2022” and that over recent weeks the group had seen “a tremendous increase [in bookings] after Omicron”.

“Last week was already at 100 per cent of pre-crisis levels and most likely it will supersede the 100 per cent in coming weeks,” he said.

Prices for summer holidays were up about 22 per cent from 2021 — an increase that Joussen said he had never before seen in his career. The impact of inflation on people’s incomes had not yet put them off booking holidays, he added.

Tui’s share price dropped more than 5 per cent in early London trading however, as investors baulked at the company’s application for shareholders to approve a potential €1.7bn capital raise at its annual meeting on Tuesday.

“If you bought shares here you could be hugely diluted; you don’t know what dilution is to come,” warned Richard Clarke, an analyst at Bernstein.

Tui, which took more than €4bn in state-backed loans to prop it up during the pandemic, said it planned to make a first repayment of €700mn to the German government in April.

The German state also has the option to convert some of its debt into equity, however, further diminishing investors’ stakes, Clarke said.