TUI’s Cruise Ships Stopped It Sinking During Europe’s Heatwave
(Bloomberg) -- TUI AG sidestepped the impact of a summer heatwave that led millions of Europeans to holiday at home as its global cruise-ship arm continued to pull in customers.
- Operating profit at the world’s largest tour operator gained 11 percent in the year through Sept. 30, contrasting with a 23 percent drop at Thomas Cook Group Plc, its closest rival, which was forced to slash prices as hot weather further north led rooms in the Mediterranean to lie empty.
- TUI Chief Executive Officer Fritz Joussen said it too faced a challenging market, while being partially insulated from the trends that hammered Thomas Cook by a reduced reliance on the traditional tour-operator business, which now accounts for only 30 percent of the business.
- The cruise-ships unit, which attracts people year-round and has a major presence in the Caribbean, as well as Europe, boosted operating profit by more than a quarter. TUI’s 300-plus in-house hotels lifted earnings almost 20 percent; Cook rents in most of its rooms, giving it lower margins that can disappear entirely when prices are cut.
- Northern Europe was still a weak spot, and Hanover, Germany-based TUI’s airlines also had a hard time as strikes and disruption at air traffic control-providers disrupted operations.
- While bookings for the quieter winter season are slightly down, TUI is predicting a 3 percent gain in sales for fiscal 2019, which it says should send operating profit up at least 10 percent. Brexit may pose a challenge, but the company says it’s developing mitigation strategies for outcomes including a no-deal split.
- TUI stock rose as much as 6.7 percent, the most since March 2016.
- The stock was priced at 13.53 euros as of 9:24 a.m. in Frankfurt, paring declines this year to 21 percent. Thomas Cook has slumped 74 percent over the same period.
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