Tui Group is reported to be raising a €500 million fund from institutional investors to finance new hotels after the pandemic left it with record debt levels.
The Tui Global Hospitality Fund would allow the company to tap into an estimated $80 trillion pool of capital managed by pension funds and insurers to expand its hotel portfolio without having to invest itself.
Chief strategy officer Peter Krueger told the Financial Times: “This helps us to return to growth because the crisis was heavy and long.”
The Luxembourg-registered fund is intended to be the first in a series that Tui will raise, with the initial round of investment going towards hotels outside Europe.
One of Germany’s largest pension funds, which has €12 billion under management, has agreed to provide half the capital.
The investment fund will allow Tui to return to its pre-pandemic investment levels of around €600 million a year but without the same costs.
Investors can buy into the fund for a minimum of €10 million and Tui will receive management fees for operating hotels.
Tui will also receive fees for its investment advice.
“You can say we are entering the asset management advisory business,” Krueger said, adding that with 20,000 employees worldwide, the company often heard about assets for sale before they came to the market.
Tui is forecasting a rapid recovery from the pandemic and expects a rush of bookings after the announcement that testing for vaccinated international travellers would be abolished from February 11.
The group has plans to raise a second, considerably larger, fund to focus on European hotels and is exploring future fundraising options for new aircraft and cruise ships – a more difficult sell to investors because, unlike real estate, they are depreciating assets, according to the FT.