Package holiday revival boosts TUI Travel

LONDON Tue Dec 4, 2012 6:32am EST

The logo of German tourism group TUI AG, owner of Europe's largest travel company TUI Travel, is pictured on a computer screen through sunglasses in this illustration picture taken in Lavigny May 20, 2012. REUTERS/Valentin Flauraud

The logo of German tourism group TUI AG, owner of Europe's largest travel company TUI Travel, is pictured on a computer screen through sunglasses in this illustration picture taken in Lavigny May 20, 2012.

Credit: Reuters/Valentin Flauraud

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LONDON (Reuters) - TUI Travel, the world's biggest tour operator, reported higher profits and bookings, saying cash-strapped Europeans were increasingly turning to fixed-price holidays to escape the economic gloom.

The British group, which owns the Thomson and First Choice brands, said on Tuesday recession-weary consumers were willing to loosen their purse strings for a get-away, but were looking for all-inclusive deals where they don't have to worry about how much they are spending.

"We're seeing a renaissance in demand for package holidays and a strong trend towards all-inclusive holidays with customers seeking greater certainty," TUI Travel's chief executive Peter Long told reporters.

"People are spending more up front," he added.

Travel firms and airlines across Europe have seen bookings fall over the last two years, hit by the euro zone debt crisis, high fuel costs and turmoil in Greece, one of the continent's main holiday destinations.

However, TUI Travel said its outlook was positive and predicted it would achieve compound annual profit growth of 7 to 10 percent over the next five years.

The group said bookings for summer 2013 from the UK were up 12 percent on last year, with the Nordic countries up 16 percent and Germany 9 percent stronger. It added that winter bookings across Europe were around 3 percent higher on average.

It reported a better-than-expected 8 percent rise in underlying pretax profit to 390 million pounds for the year to the end of September, on revenue 2 percent lower at 14.46 billion pounds.

The company was expected to report full-year pretax profit of 363 million pounds, according to the average forecast in a Thomson Reuters I/B/E/S poll of 16 analysts.

FRANCE SUFFERS

TUI Travel said it had a strong 2012 summer holiday season after rain-soaked northern Europeans sought out the sun and kept tight control on their budgets with its package deals.

Shares in TUI Travel, which have risen more than a quarter in the last three months, were up 2.9 percent at 276.9 pence by 1030 GMT, valuing the business at around 3 billion pounds.

Peel Hunt analyst Nick Batram said he would likely upgrade his profit forecasts for TUI Travel after the strong results but highlighted a lack of growth at its more profitable specialist holidays unit as a worry.

"The irony is that it is mainstream (holidays) driving profits rather than the more specialist businesses ... whilst earnings are moving forward the quality of those earning is questionable," he said.

Bookings during the year were up across Britain, Germany and the Nordic region, but fell 28 percent in France as the firm reduced capacity in the country. France also suffered because of a slower than expected recovery in North African markets, which are popular among French travellers.

The company, which raised its full-year dividend by 4 percent to 11.7 pence per share, said profit had also been boosted by a increase in selling prices of between 4 and 6 percent across European markets during the year

Rival UK travel firm Thomas Cook (TCG.L) last week said it had seen a strong finish to its fourth quarter as its recovery plan cranked into gear, after a year in which operating profit nearly halved. (Editing by Brenton Cordeiro and Mark Potter)