TUI to Bolster Hotel, Cruise Offering to Attract More Travelers

May 16, 2014 5:09 am ET

May 16 (Bloomberg) -- TUI AG, the owner of Europe’s largest tour operator, plans to add cruise ships and hotels as Chief Executive Officer Fritz Joussen seeks to double the number of customers within five years.

The German company, based in Hanover, now has about 5 million customers using TUI’s own hotels and ships, only a fraction of travelers who book their holidays through the company’s agents and then opt for non-TUI products. TUI said today that sales growth this year may be at the lower end of its forecast because of a slowdown in customers at its travel unit.

“For the next five years, we want to defend our market share, and we want to push growth in our Riu hotels, Robinson Clubs, our new hotel brand and the cruises business,” Joussen said on a call to discuss the earnings. “We want to grow considerably from the 5 million clients we have today,”

Sales this fiscal year may be closer to 2 percent than 4 percent as bookings at TUI Travel Plc, the tour operator majority-owned by TUI AG, are trailing last year’s. TUI fell as much as 30 cents, or 2.5 percent, to 11.77 euros in Frankfurt.

Joussen has been reviewing activities in the past year, as he seeks to stem losses from the cruises business, improve capital returns from the hotels portfolio and prepare a sale of the remaining stake in container shipper Hapag-Lloyd AG. He also plans to whittle down the broad portfolio of labels, which he today called a “jungle of brands.”

More Clubs

TUI plans to expand the number of Robinson clubs to about 40 from 24 today, and wants the unit’s return of invested capital to rise to above 9 percent by year-end. The company also aims to lift the number of Riu hotels, jointly owned with the Spanish Riu family, by 3 to 5 new hotels every year, and add more cruise ships.

The company will create a new TUI hotels and resorts brand, which may consist of as many as 50 properties 5 years from now. The majority of those will be leased or run on management contracts, and some may be re-branded hotels already in the portfolio.

TUI’s adjusted loss before interest, taxes and amortization widened 4 percent to 205.1 million euros ($281 million) in the three months ended March 31, as sales fell by 5.3 percent to 3.17 billion euros. Earnings will rise by between 6 percent and 12 percent this year, adding it was “very confident to fully reach” that target.

The net loss narrowed to 122.3 million euros from 249.7 million euros in the year-earlier period, the company said.

TUI Travel Plc on May 13 reported a wider first-half loss on a later Easter holiday and as it served fewer guests due to political unrest in Egypt and the conflict between Russia and Ukraine.