Strong lates trading in the UK announced by Tui Travel in a third quarter trading update yesterday was down to not chasing volumes in the early part of the summer.
Peter Long, chief executive of Europe’s largest travel firm, told investors that it was pleased with trading since the last update three months ago.
He said the business had flexibility, it was resilient and it was focused on growing differentiated product and online bookings further.
Long claimed compared to competitors it was better at coping with issues that arise, like the problems in Greece, and that it was on course for long-term sustainable growth.
He said there was a number of factors behind the improved trading. “Firstly we are getting benefit from differentiation and we are looking as we go forward to accelerate that.
“Also in yield management; we did not chase high season volume in the early booking period.
“As a consequence of that we have ended up with more desirable holidays left to sell and we have been able to yield manage more effectively that stock which is in strong demand.
“The worse thing you can do in our industry with our business model is under sell what you know you can sell, which is premium holidays within the premium season.
“The weather has clearly had a favourable impact for us, but equally we had a weakness of demand and the impact that had on margins to Greece and we have the European cup but they have been dealt with.”
Long said the Olympics had not had a significant impact on demand in July and August for the core business, although Tui did say it had hit its online travel agency as people stopped travelling to London, a significant chunk of its business, as hotels hikes their prices.
“Our view was always that the Olympics would not have a significant impact on demand for the key period and that has proven to be correct.
“Clearly we are all very proud of our Olympians and we are all glued to the television but you can do that on satellite TV al round the world.”
Long wrapped up by saying that Tui was now as the end of a long period of restructuring with ongoing work to cut costs in the struggling French market and in Germany representing the last phase in that process.
He said this will mean in future years Tui will not incur the costs of restructuring and that this is expected to have a positive impact on cash generation.
“Since the merger [with First Choice] we have had a number of important aims. One was to successfully compete it and create one organisation and I think we did that very very quickly.
“Second was to ensure that we could run our business efficiently and we had a significant benefit by integrating the two businesses in the UK.
“Third was to avoid competing all that away and we have retained most of that synergy benefit and fourth we wanted to demonstrate that we can run this business without continual restructuring.
“This is that last major year of restructuring and therefore we can support the underlying earnings of our business without further restructuring.
“That in turn should lead to one of the missing parts of the business which is stronger cashflow and cashflow generation without having the constant level of restructuring costs. And that is a focus.
“We are positioning ourselves for long-term growth. This is an exciting industry, it’s an industry were there is demand for holidays and more of our customers want to spend more of the disposable income on holidays and we want to be in a position where we get full benefit from that.
“Whilst there is a lot of uncertainty, going forward, we believe the stronger will get stronger in this environment and therefore we believe we are well placed to succeed and that will not interrupt our journey building our business and demonstrating that this business that has long term sustainable growth.”
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