ANDREA FELSTED: UK travellers not as keen as European tourists for summer holidays
TUI, the world’s biggest tour operator, says demand from the UK is being held back by the government’s inconsistent travel advice
13 August 2021 - 11:07
byAndrea Felsted
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That’s been the optimistic message from a slew of travel businesses over recent weeks. It was echoed on Thursday by TUI, the world’s biggest tour operator, when it released third quarter earnings. However, despite adding 1.5-million new bookings since May, the company — based in Hanover, Germany — noted that UK travellers have yet to match the enthusiasm of their European counterparts for holidays in Mediterranean hotspots. Indeed, there are still significant risks to the travel industry’s recovery — from rising infections, a corresponding tightening of restrictions and fragile consumer confidence.
There are certainly promising green shoots. Duty free operator Dufry said sales of cosmetics and food and drink were improving as people get on the move. InterContinental Hotels Group, owner of the Holiday Inn and Crowne Plaza brands, said that July revenue per available room — a key industry measure of hotel performance — was above the 2019 level at almost 50% of its hotels globally, reflecting gains in occupancy and the prices charged for rooms.
TUI is upbeat and its numbers look to be going in the right direction, especially coming after the lockdowns of the past 18 months. But they have yet to reach pre-pandemic levels. Total bookings this summer are at 4.2-million, still down 68% from 2019. Similarly, Heathrow Airport said on Wednesday that there was a 74% increase in July passengers compared with 2020, but that was still 80% down on 2019.
The German company said demand from the UK was being held back by the government’s inconsistent travel advice, which was creating uncertainty for consumers. That includes the high cost of testing, which TUI is subsidising for its UK customers. While sales have picked up over the past two weeks, Brits cancelled more holidays for most of this year than they booked. That is in stark contrast to Germany, Belgium and the Netherlands, where sales mostly exceeded cancellations.
In fact, in its least sanguine announcement, TUI said it would cut the holidays available this summer from the 75% of 2019 levels it set out in May, to 60%. That is due to less demand from British tourists. This summer, German capacity will outstrip that of the UK. Usually TUI’s two biggest markets are roughly the same size, with Britain often slightly ahead.
This echoes easyJet, which said last month that it was shifting capacity to mainland Europe because two-thirds of its sales were coming from the continent. In a typical season, there is an even split with the UK.
Even Europe remains volatile. Travel has been less restricted since July 1, when the EU’s digital Covid certificate exempted holders from testing or quarantine. But bookings from both the Netherlands and Germany dipped after governments temporarily tightened restrictions in response to rising infections.
Such anxiety is evident too in the US as the Delta variant sweeps the country. While Americans had been increasingly keen to travel throughout this year, their enthusiasm has waned since the start of July, according to Destination Analysts. Americans feel the least safe travelling since April, the data provider’s latest research shows.
Everywhere patterns have become harder to predict. Consumers are booking travel just before their desired departure dates. That makes it much more difficult for companies to manage their capacity and cash flow.
It is a headache for all airlines and tour operators. But it is a particular worry for TUI. It is no longer burning through cash because deposits paid for vacations helped the company generate €320m of cash flow before financing costs in the three months to June 30. However, it is still labouring under €6.3bn of net debt. Though that is an almost €500m improvement from the level at the end of March, it remains a burden.
Liquidity has also got better, to €3.1bn from €1.7bn at March 31. That gives TUI some breathing space to tackle its stretched balance sheet. But it will still need to sell assets or raise equity to bring down its borrowings. Or somehow get a lot more Brits on tour before the peak summer holiday months are over.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
ANDREA FELSTED: UK travellers not as keen as European tourists for summer holidays
TUI, the world’s biggest tour operator, says demand from the UK is being held back by the government’s inconsistent travel advice
If you open it, they will vacation.
That’s been the optimistic message from a slew of travel businesses over recent weeks. It was echoed on Thursday by TUI, the world’s biggest tour operator, when it released third quarter earnings. However, despite adding 1.5-million new bookings since May, the company — based in Hanover, Germany — noted that UK travellers have yet to match the enthusiasm of their European counterparts for holidays in Mediterranean hotspots. Indeed, there are still significant risks to the travel industry’s recovery — from rising infections, a corresponding tightening of restrictions and fragile consumer confidence.
There are certainly promising green shoots. Duty free operator Dufry said sales of cosmetics and food and drink were improving as people get on the move. InterContinental Hotels Group, owner of the Holiday Inn and Crowne Plaza brands, said that July revenue per available room — a key industry measure of hotel performance — was above the 2019 level at almost 50% of its hotels globally, reflecting gains in occupancy and the prices charged for rooms.
TUI is upbeat and its numbers look to be going in the right direction, especially coming after the lockdowns of the past 18 months. But they have yet to reach pre-pandemic levels. Total bookings this summer are at 4.2-million, still down 68% from 2019. Similarly, Heathrow Airport said on Wednesday that there was a 74% increase in July passengers compared with 2020, but that was still 80% down on 2019.
The German company said demand from the UK was being held back by the government’s inconsistent travel advice, which was creating uncertainty for consumers. That includes the high cost of testing, which TUI is subsidising for its UK customers. While sales have picked up over the past two weeks, Brits cancelled more holidays for most of this year than they booked. That is in stark contrast to Germany, Belgium and the Netherlands, where sales mostly exceeded cancellations.
In fact, in its least sanguine announcement, TUI said it would cut the holidays available this summer from the 75% of 2019 levels it set out in May, to 60%. That is due to less demand from British tourists. This summer, German capacity will outstrip that of the UK. Usually TUI’s two biggest markets are roughly the same size, with Britain often slightly ahead.
This echoes easyJet, which said last month that it was shifting capacity to mainland Europe because two-thirds of its sales were coming from the continent. In a typical season, there is an even split with the UK.
Even Europe remains volatile. Travel has been less restricted since July 1, when the EU’s digital Covid certificate exempted holders from testing or quarantine. But bookings from both the Netherlands and Germany dipped after governments temporarily tightened restrictions in response to rising infections.
Such anxiety is evident too in the US as the Delta variant sweeps the country. While Americans had been increasingly keen to travel throughout this year, their enthusiasm has waned since the start of July, according to Destination Analysts. Americans feel the least safe travelling since April, the data provider’s latest research shows.
Everywhere patterns have become harder to predict. Consumers are booking travel just before their desired departure dates. That makes it much more difficult for companies to manage their capacity and cash flow.
It is a headache for all airlines and tour operators. But it is a particular worry for TUI. It is no longer burning through cash because deposits paid for vacations helped the company generate €320m of cash flow before financing costs in the three months to June 30. However, it is still labouring under €6.3bn of net debt. Though that is an almost €500m improvement from the level at the end of March, it remains a burden.
Liquidity has also got better, to €3.1bn from €1.7bn at March 31. That gives TUI some breathing space to tackle its stretched balance sheet. But it will still need to sell assets or raise equity to bring down its borrowings. Or somehow get a lot more Brits on tour before the peak summer holiday months are over.
Bloomberg Opinion. More stories like this are available on bloomberg.com/opinion
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