Tui growth in dynamic packaging drives volume but its unique product boosts margin

Tui reported sales of its high-margin “unique differentiated product” drove the group’s record results for the April-to-June quarter as it raised its full-year profit guidance this week, despite a wholesale move into dynamic packaging.

 

Group chief executive Sebastian Ebel hailed a “strong nine months and a great third quarter” saying Tui’s growth in operating profit “demonstrates the transformation benefits and reduced seasonality driven by record hotels and resorts and cruise results”.

 

He said the accelerating transformation in Tui’s markets and airline business, which comprise its tour operators and carrier, “will deliver growth” and promised: “We’ll talk in more detail [about this] in September.”

 

More: Tui summer bookings down 2% amid late trend in ‘highly competitive’ market

 

Ebel added: “We see integration benefits growing.”

 

He reported “a very strong improvement on the cruise side – not only due to new capacity but also to not having to re-route [cruises] because of the Suez Canal closure last year”.

 

And he said: “We’re growing significantly in dynamic packaging with Ryanair and easyJet flights.”

 

He described dynamic packaging as “a growing and margin-rich environment”, saying: “We believe we can accelerate this.”

 

A wholesale switch to dynamic packaging in Tui’s Western Region, in France and the Benelux countries, will be used to turnaround the businesses. Tui reported a contraction year on year in the region of two percentage points in its third quarter to June and three percentage-point contraction in the year to date.

 

Ebel said: “There is an opportunity to turn around the business and make it profitable in the next months”.

 

However, he insisted the key to understanding the group’s strong results – it reported a third-quarter profit after tax of €225 million, more than double that of a year ago, and a 7% rise in quarterly revenue to €6.2 billion despite reporting 2% fewer bookings for this summer year on year in its tour operator business.

 

Ebel said: “We achieve a strong rate for our own unique, differentiated products. We’re able to package Ryanair and easyJet flights, but with non-differentiated product it’s a very competitive market.

 

“With differentiated product you’re independent of that. It’s our differentiated product which makes Tui unique. It’s not just our hotels but service and our airline.”

 

He added: “We’re 90% sold for the summer [to the end of October] So, we’re not as aggressive as others in late bookings. It’s not as important as in the past for Tui.”