The UK delivered a strong operating performance for Tui Group with carryings up by 4% in the year to September in the face of “continuing geopolitical crises” and economic challenges.
This helped the world’s largest tour operating business raise annual earnings [EBITA] by 12.5% to €1.03 billion.
The UK performance by the Thomson and First Choice owner was driven by the strength of customer demand for unique holidays, with growth across short, medium and long haul, and the introduction of new ship Tui Discovery.
“We have also made further significant progress in increasing online distribution, with 58% of UK holidays booked online this year, up four percentage points,” the group revealed.
However, earnings from Tui’s northern region, which includes the UK, dropped to €461 million from €538 million the previous year as travel from the Nordics to Turkey more than halved following security fears.
Tui described trading for winter 2016-17 and summer 2017 as being in line with expectations.
The company reported strong growth in long haul and cruise from the UK for the current winter period, with 57% of the programme sold, revenue up by 26% and bookings up by 19%.
But this is being offset by “continued pressure” in the Nordics and Germany as a result of lower demand for Turkey and North Africa.
Overall winter long haul bookings are up by 13%, helped by additional Boeing 787 Dreamliner flights from the UK.
The overall winter programme is 60% sold with revenue 9% ahead year-on-year.
Referring to the UK, Tui said: “Sales to the Canaries and long haul have been particularly strong, with bookings up 16% and 21% respectively.
“Long haul expansion has been facilitated by the new Boeing 787-900, delivered in summer 2016, with Mexico, Dominican Republic and Jamaica proving popular and new destinations added such as Cuba and Sri Lanka.
“Cape Verde and Cyprus continue to grow as alternative destinations to North Africa.
“This winter season also sees the first winter operations of the Tui Discovery and we are pleased with performance to date for the new ship.”
The UK is more than 20% sold for summer 2017 with revenues up by 16% and bookings rising by 9%, with growth driven by long haul and cruise, including the launch of Tui Discovery 2.
This shows “the continued resilience in demand for our holidays”.
Tui, which completed the sale of Hotelbeds in September and is in the process of disposing of Travelopia, expects to deliver at least 10% growth in underlying earnings for the next three financial years.
“This balanced guidance is a clear demonstration of the confidence we have in our growth strategy, against what continues to be an uncertain geopolitical and macroeconomic backdrop,” the group said.
“Our sustained strong performance is a clear demonstration of the success of our growth strategy and the strength of our competitive position against what continues to be a turbulent geopolitical and macroeconomic backdrop.
“We believe our strategy creates value for our customers, our people and our shareholders alike.”
Chief executive Fritz Joussen said: “Despite continued geopolitical crises and macroeconomic challenges, we have withdrawn from the trend of the industry and delivered considerable earnings growth.
“Our strategy as a tourism group with a vertically integrated model and the consistent transformation of our group with a focus on our own hotel and cruise brands are increasingly paying off.”
He added: “Tui is in good shape, the course is set for growth.
“We are in a strong position in Europe, continue our expansion, in particular in Mexico and the Caribbean, and seek to benefit from the growth momentum in other parts of the world, where more people are discovering leisure travel.
“Thanks to the global strength of the Tui brand, it offers great potential internationally. We invest in hotels and cruises with their strong growth and margin potential, and consistently continue Tui’s transformation initiated in 2014.
“We extend our earnings guidance to 2018/19 and aim to continue to deliver underlying EBITA of at least 10% in the next three financial years.”
He highlighted the transformation from a tour operator and distributor to a “designer, developer and operator of holiday concepts, hotels and cruise vessels with a strong sales organisation,” initiated in 2014, as paying off as these areas offer higher margins.
Joussen added: “This transformation will create a new Tui – exceptional holiday experiences for our guests, value for our shareholders, and internationally attractive prospects for our people in more than 100 countries.”
Commenting on the results, Martin Lane, a representative at money.co.uk, said: “With Thomson releasing its final marketing campaign in the run up to Christmas this month, these results feel like a happy ending for the brand before being absorbed into the safe hands of the Tui Group.
“Tui themselves have done well to keep profits buoyant in times of financial uncertainty and in a time when other traditional holiday agents have struggled.
“It would appear perhaps consumers are turning to cheap holidays to wash away the grubby realities of life.”