Tour operators will find good quality hotels increasingly scarce as competition increases from emerging markets, Tui Travel boss Peter Long has warned.
The chief executive was speaking to investors last week about the proposed merger of Tui Travel and German parent Tui AG, which owns a 54% stake in the Luton-based travel giant.
City analysts noted the move was a switch in strategy for Tui to become more asset-heavy, incorporating Tui AG’s 230 hotels and loss-making cruise operation, but Long said: “More and more quality hotels you do not have control of are becoming increasingly scarce. In the Maldives, 25% of rooms are [booked] by Chinese companies.
“Quality content is going to be a huge asset to the business. We are taking the best of both organisations to create a stronger business with long-term sustainability.”
Tui Travel was formed in 2007 through the merger of Thomson and First Choice.
It had been widely reported that Tui AG was looking to take a greater share of the growing UK operation. This was to be funded from the sale of its 22% stake in Hapag-Lloyd, but turmoil in the shipping industry prevented this and saw Tui AG’s value dip below that of Tui Travel.
As assessment of the proposed merger from investment bank Morgan Stanley concluded, Tui AG had “few other long-term options”.
It added that, while there were financial benefits, negatives included little added value for Tui Travel shareholders and the shift to become more “asset heavy”.
The prospect of selling non-core businesses in its online accommodation and specialist tour operating division was both a negative and a positive.
Long denied it wanted to sell these businesses, although speculation persists of a £1 billion private equity deal or float.
If the merger achieves 75% shareholder support, Long and Tui AG chairman Friedrich Joussen will be joint chief executives until February 2016, when Long becomes group chairman.