TUI (TUI) is making strong strategic progress after cutting its seasonal losses in its first quarter to 31 December 2017, driven by growth in its hotels and resorts.

In a bid to mitigate the seasonal impact on the tourism sector, the tour operator is investing in its cruise ships and hotels, which represented 56% of earnings in 2017.

Last month, we took an in-depth look into TUI's trading, revealing its strategy for future growth alongside its rival Thomas Cook (TCG).

TUI's strategy appears to be paying off as sales in hotels and resorts soared 83.5% to €94.4m. This helped losses on an underlying earnings before interest, tax and amortisation (EBITA) measure narrow 47% from €85.1m to €45.1m.

In the cruises division, sales accelerated 35.5% to €37.5m.

Last year, TUI benefitted from positive momentum in its hotel and cruise brand, delivering 12% underlying EBITA growth to €1,102m.

Looking ahead, the tour operator is on track for another impressive year with a target of ‘at least’ 10% EBITA growth in the year to 30 September 2018.

Shares in TUI are 4% higher at £16.62.

UK COST PRESSURES REMAIN

Shore Capital’s Greg Johnson says a €17m improvement in the tour operator segment and good performance in the Nordics, Belgium and Netherland also contributed to the robust performance.

The one exception to this was the UK due to cost pressures on margins from the pound post-Brexit vote, which the analyst expects to continue.

Johnson remains upbeat that trading outside the UK will offset this, flagging strong demand from most regions.


Issue Date: 13 Feb 2018