Travel giant TUI bets on summer vacations as COVID-19 vaccines boost a surge in bookings

Arhaq

Summer holidays are
back on.

That is the sunny outlook from Tui, which said that it expects a rebound in summer demand and higher prices, as the rapid rollout of the U.K.’s COVID-19 vaccination program gathers pace.

The world’s biggest tour operator said on Tuesday that it expects to run 80% of its normal capacity for this summer, with 2.8 million customers already booked for the season ahead.

Average vacation prices were 20% above their pre-pandemic levels, Tui said, as people splashed out more on higher-level packages. Daily bookings in January were 70% higher compared with December 2020, and the company expects the peak booking period is still to come.

“A look at the historically high savings rate in the EU also underlines that the scope for consumer spending is high,” said Fritz Joussen, chief executive of Tui
TUI,
-4.01%.
“The significant increase in spending on booked travel reflects this very clearly. Holidaymakers are catching up and are willing to pay more for their holidays.”

Read: Biden to reinstate travel bans amid fears about new variants as global case tally heads toward 100 million

Joussen’s comments come a day after England’s deputy chief medical officer, Prof. Jonathan Van-Tam, told a news conference that it was “too early to say” whether people could begin to start planning summer holidays.

From next week, travelers arriving from countries deemed high risk such as South Africa, where new strains of coronavirus have been identified, will have to quarantine in hotels for 10 days.

Read: COVID-19 hotel quarantine from high-risk countries to start in U.K. from Feb. 15

Russ Mould, analyst at AJ Bell, said Tui was “gambling its
fortunes” on a last-minute surge for summer bookings.

“Any major delay to rolling out the vaccine to a younger and more active age group could put significant pressure on its finances, which are already creaking due to very high debt levels,” Mould added.

Shares in Tui, which have fallen by around 40% over the past year, were trading 0.54% lower on Tuesday morning in London, where the company has its primary listing.

More than 10 million people in the U.K. have already received one dose of either the vaccine developed by U.K.-Swedish drug company AstraZeneca
AZN,
+0.32%
 with the University of Oxford, or the shot from U.S. drug company Pfizer
PFE,
+0.34%
and its German partner BioNTech
BNTX,
-1.54%.
However, several European Union countries have paused inoculations amid a shortage of supplies in the 27-member bloc.

Read: Pfizer–BioNTech partnership pledges 75 million more vaccine doses to help ease the EU bloc’s shortage

In the three months to the end of December, TUI
TUI1,
-3.94%
said revenues fell 88% from €3.85 billion ($4.66 billion) to €468 million, as a result of travel restrictions in its key European markets. The group fell to an underlying loss before interest, tax, depreciation and amortization of €699 million for the quarter, compared with a loss of €147 million for the same period in 2019.

Tui said it had cut its monthly cash outflow to €300 million, from an expected level of €400 to €500 million, and said it had liquidity of €2.1 billion at the beginning of February after a recent state-backed €1.8 billion financial support package, which included a €500 million rights issue.

Analysts at Jefferies cautioned that Tui would suffer from summer cancellations. “We note that the working capital outflow from any cancellations would severely limit liquidity endurance,” they wrote in a note to clients on Tuesday.

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