TUI AG said it expects its summer 2023 travel season to be close to pre-pandemic levels even as the pace of growth tapers off amid higher inflation and rising interest rates.
(Bloomberg) — TUI AG said it expects its summer 2023 travel season to be close to pre-pandemic levels even as the pace of growth tapers off amid higher inflation and rising interest rates.
The world’s biggest tour operator said underlying earnings before interest and tax rose to €169 million ($185 million) in the quarter ended June 30, its first profitable early summer quarter since the pandemic and beating analyst forecasts for a €145 million result. TUI’s figures showed, however, that growth in demand from consumers in the UK was cooling.
“Where we see challenges – in the UK market and in the Nordic countries – we have taken actions to strengthen and grow our market position,” TUI Chief Executive Officer Sebastian Ebel said in a statement, adding “But overall it will be a very good travel summer and a good year for TUI in 2023.”
TUI stuck to guidance for underlying earnings before interest and tax to be higher than the €409 million it reported for the year ended Sept. 30 when the removal of Covid-related curbs paved the way for a bumper travel season across Europe.
Shares rose as much as 4.1% and were trading 3.2% higher at 8:18 a.m. in London.
Still, there are signs that the breakneck pace of recovery from the coronavirus pandemic is starting to slow as inflation and rising interest rates constrain household travel budgets. In the UK, one of TUI’s core markets, bookings were just above 2022 levels and 4% higher than pre-pandemic levels.
Average holiday prices are 7% higher than last year, the tour operator said. TUI said winter travel bookings were “at a very early stage,” although it claimed it was starting “promisingly.”
TUI said its summer bookings were at 95% of pre-pandemic levels, in line with previous guidance. The tour operator expects the costs of recent wildfires on the Greek island of Rhodes to be around €25 million, including compensation and repatriation flights.
European travel firms are reporting strong financial results despite inflation and high energy costs damping consumer spending. Deutsche Lufthansa AG last week said its second quarter earnings tripled as soaring demand for travel boosted ticket prices.
(Updates with CEO comment, shares)
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