TUI bets on diversification

By Alfred Bouchaud

TUI Group (Tourism Union international) is an Anglo-German leisure, travel and tourism company headquartered in Hannover, Germany. It is the largest corporation (its turnover reached 19,5 billion euros in 2018) and owns travel agencies, hotels, cruise ships, tour operators and airlines including six European one.

Brexit represents a salient uncertainty for the FTSE 100 travel group. Indeed, having access to EU airspace is a key point as regards TUI’s airlines business. Visa requirement to enter the UK and the decrease in the value of the pound are other issues which could lead to a shift in demand among European tourists and British people.

Moreover, in the end of January 2018, TUI, as well as some of its rivals such as Thomas Cook, posted airline financial losses partly due to the unusual hot weather during the year which impacted negatively its margins in the Spanish division for example. On the one hand, according to widely accepted wheather forecasts, by 2050, some European cities could face harsh heatwaves that could be harmful for Mediterranean tourism for instance. On the other hand, climate change enables TUI’s cruise ships to reach more destinations which used to be unattainable as exemplified by the development of cruises toward Greenland and the Artic. In recent years, according to Friedrich Joussen, TUI CEO, the group has « invested in transformation », changing its business model to include hotels and cruise ships in addition to its tour operator activity. This strategy turned out to be fructuous as performances of hotels and cruise trips helped to make up for poor results of airlines.

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