Tui shrugs off security concerns as bookings rise

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Tui, the world’s largest tour operator, has said UK demand is up and it is on track to increase profits despite fears security concerns could deter tourist travel.

Shares in the group rose almost 6 per cent on Thursday after it reported underlying earnings before interest, tax and amortisation were up 15.4 per cent for the year, to €1bn on a constant currency basis. The figures, which discount currency fluctuations and exclude discontinued operations at booking website LateRooms, were slightly ahead of forecasts.

Tui said it had benefited from “a particularly good performance” in the UK and northern Europe, and at its hotel business.

Bookings for the winter season were at 60 per cent of capacity, it added, despite a terrorist attack at a resort in Tunisia in which 33 of its customers were killed and the suspension of trips to Sharm el-Sheikh in Egypt after the bombing of a Russian passenger jet in October. The 60 per cent figure is “broadly the same” as last year, said chief executive Peter Long.

The group said UK trading would continue to be strong for the summer 2016 season, with bookings to date 11 per cent higher year on year.

Co-chief executives Friedrich Joussen and Mr Long said in a joint statement: “Taking into account the continued cessation of flights in and out of Sharm el-Sheikh by several countries, current trading for winter 2015/16 and summer 2016 is in line with our expectations.”

Tui said the attack in Tunisia in June had cost it €52m, more than its previous guidance of €35m-€40m, though the effects of ceasing travel to Sharm el-Sheikh fell outside the reporting period.

There remain concerns that events in Egypt and the attacks in Paris last month, in which 130 people were killed, could damp demand for overseas travel. Greg Johnson, leisure analyst at Shore Capital, said that while “we can’t be sure of the impact [of terrorism] sentiment-wise”, bookings had remained robust.

Mr Long said the company would redirect business from Sharm el-Sheikh to resorts in the Canary Islands and Cape Verde and declare “force majeure” with hotel partners to exit contracts in Sharm el-Sheikh.

Analysts at Morgan Stanley cautioned, however, that there was overcapacity in the Canary Islands.

Turnover in the year to September 30 increased 8 per cent to €20bn, and profits in the cruise business rose to €81m from €10m last year. The travel group said the “likely sale” of Hotelbeds, its online hotel booking business, would be agreed by the end of this year or early next.

Richard Stuber, analyst at Nomura, said the disposal of Hotelbeds would be “an important catalyst that may offset concerns regarding the ongoing geopolitical turbulence”.

Tui’s shares were 5 per cent higher in late afternoon London trading at £11.75.

The figures were the group’s first annual results as a merged entity after the combination of London-listed Tui Travel and German majority owner Tui AG in December last year.

Mr Long is due to leave the merged business to take a role on the supervisory board where he says he will “ask questions instead of being the one with all the answers”. He also joined Royal Mail as chairman in June this year.

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