14th Dec 2022 15:54
(Alliance News) - Shares in package holiday operator Tui AG fell on Wednesday, despite reporting a swing to profit in the final quarter of its financial year, as investors worry that economic hardship will take the place of Covid-19 restrictions to keep travel grounded.
The Hanover-based company noted that a trend toward last-minute bookings has continued into winter, as holidaymakers keep their options open.
For the twelve months that ended September 30, Tui posted a pretax loss of EUR146 million, narrowed from a loss of EUR2.46 billion a year prior. Revenue multiplied to EUR16.55 billion from EUR4.73 billion after Covid-19 travel restrictions were lifted.
In the fourth quarter alone, Tui swung to a pretax profit of EUR887 million from a loss of EUR71 million a year ago. Revenue jumped to EUR7.61 billion from EUR3.37 billion.
Importantly, Tui reduced its net debt as of September 30 to EUR3.44 billion from EUR4.95 billion a year before.
Tui said it expects to operate its Winter 2022-23 programme at close to pre-pandemic levels. The winter programme is 54% sold, which means bookings are at 134% of last year and 84% of 2018-19 levels.
The Anglo-German company added: "We expect year-round destinations such as the Canaries, the Caribbean and Cape Verde to remain key winter destinations for both our markets & airlines and third-party customers, with our diversified and integrated model delivering clear advantages in the current environment."
Tui said it is closely monitoring the impact of the war in Ukraine and market uncertainties amid inflationary pressures on energy and exchange rate volatility.
Looking ahead, Tui noted a continuing "trend towards a higher share of short-term bookings", meaning customers are opting to book holidays less far in advance in the current fragile and inflationary economic environment.
Discussing specifically its Cruise business, Tui said: "Short-term bookings continue to represent a large share of overall bookings; encouragingly, the proportion of mid-term bookings is increasing as customer confidence returns."
Lara Martinez, an analyst at investment research firm Third Bridge, commented: "Tour operators are bracing themselves for a challenging winter. Our experts say that a significant proportion of winter holiday bookings are being postponed or even cancelled."
She added: "Most of next summer's bookings will be made between now and February. Our experts expect year-on-year growth but for overall demand to remain below pre-Covid levels."
Tui shares were down 8.9% to 134.65 pence each late Wednesday afternoon in Londone. The stock is down 38% over the past 12 months.
Cost inflation remains a big problem for holiday operators such as Tui.
"So far, the group has been able to increase its prices by almost double digits without scaring off customers," commented Richard Finch, consumer analyst at research house Edison.
"Although this has covered the group's own rising costs, investors will be keen to see how much pain households will continue to bear as the group continues to raise prices in the New Year."
Martinez at Third Bridge said: "Tui's margins will be challenging over the next 12 to 18 months as they are forced to run more promotions and offer last-minute bookings to fill the empty seats. This means their average selling prices will gradually go down."
By Tom Budszus, Alliance News reporter, and Tom Waite, Alliance News editor
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