Slowing Sales Show Europeans Have Had Enough of Sun
(Bloomberg) -- The European heatwave has left Germans and Brits with little appetite for more hot weather, leading to a dearth of late-summer holiday reservations and sending shares of travel giant TUI AG tumbling the most in two years.
With people having basked for weeks in record temperatures in their own backyards, there’s no sign of the late-season sales surge that typically accompanies wetter, cooler summers, Hanover, Germany-based TUI said Thursday.
“Hot weather isn’t usually the right environment for last-minute bookings,” Chief Executive Officer Fritz Joussen said on a conference call.
A heatwave stretching from Ireland to Russia has brought a Mediterranean climate to northern Europe and encouraged people to holiday at home. The U.K., one of TUI’s biggest markets, registered the highest average June temperatures since 1940, while readings above 40 degrees Celsius in Spain have led authorities there to warn about the dangers of heatstroke.
TUI shares fell as much as 9.7 percent, the steepest intraday decline since June 2016, and were trading 8.6 percent lower at 16.05 euros as of 11:18 a.m. in Frankfurt.
While a sales surge earlier in the year helped TUI fill 86 percent of capacity, an increase on 2017, the company said the hot weather means it’s unlikely to outperform a forecast 10 percent annual gain in underlying earnings before interest, tax and amortization.
Ebita fell 13 percent to 193.4 million euros ($224 million) in the fiscal third quarter through June, while gaining for the nine months.
TUI’s comments echo those last week from rival Thomas Cook Group Plc, which said the weather-related bookings slide was hurting margins and that full-year earnings would be at the lower end of its forecasts. The trend is particularly damaging because late trips tend to be more-highly priced, CEO Peter Fankhauser said.
Joussen said European package-holiday demand is always weather dependent and that the early-season boost may itself have been triggered by snowfalls that stretched into March in countries including Britain. He also predicted that future sales may benefit as those who decided not to holiday in August and September opt for Christmas or new year breaks.
“If the weather is so hot maybe people say I will save my money for my next winter vacation,” he said.
A trend toward increased bookings in Turkey and North Africa is continuing as concerns about the terror threat fade, TUI said in the statement. Earnings were buoyed by the company’s cruise-ship unit, which leapfrogged hotels to become the biggest profit contributor with 47 percent of the total.
U.K. bookings rose but margins shrank on a weaker pound. Joussen said it’s too early to say if Britons will be put off traveling immediately after the scheduled split from the European Union on March 29. He said TUI “will prepare for everything,” while predicting that negotiators will agree a “grace period” that should head off any Brexit-related disruption.
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