TUI Travel Benefits From Thomas Cook's Woes

February 7, 2012

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TUI Travel, the world's biggest tour operator, said it significantly outperformed the wider British market in January as it benefited from rival Thomas Cook's troubles.

TUI, which owns Thomson and First Choice, said on Tuesday it had seen an upturn in bookings because customers had lost confidence in Thomas Cook, which required emergency funding from banks in November following a string of profit warnings.

"I think we are clearly a beneficiary of the uncertain environment that our competitor is operating in. We have always said that was likely," Long told reporters.

Thomas Cook, which issued three profit warnings last year culminating in a funding issue, said summer bookings were sharply lower in early January.

TUI Travel took advantage of its rival's difficulties: in the days following Thomas Cook's November statement it placed full-page advertisements in national newspapers which accentuated its relatively healthy finances.

"What we did at the time of their announcement was to make it very clear that Thomson and Thomas Cook are very different businesses under different ownership," Long said.

TUI Travel, majority-owned by German group TUI, said over a third of its summer holidays had been sold and it had seen a sharp rise in online bookings.

About 42 percent of holidays were sold online, up 6 percentage points on the previous year, while average selling prices were up 8 percent, it said.

Long said TV campaigns promoting Thomson and First Choice, which offers only all-inclusive packages, had led to a rise in the number of customers booking online.

"Those campaigns are supporting our strategy of differentiation. We have had a huge amount of resonance from that and they have been very well received. That is why we are seeing such an increase in the level of traffic to our websites."

TUI Travel has focused on offering "differentiated products," such as its Holiday Village and Sensatori resorts which cannot be booked through rivals.

Shares in TUI Travel have risen by over 50 percent since November, boosted by Thomas Cook's woes and speculation TUI will bid for the shares it does not already own.

TUI is close to a deal to sell part of its stake in container shipping company Hapag-Lloyd to its majority shareholder, the Albert Ballin consortium and plans to focus on its tourism business.

Long declined to comment on the likelihood of TUI, which currently holds a 55.5 percent stake, bidding for the remainder.

"It is ongoing speculation in terms of what might happen. All I can say is we have a very supportive majority shareholder. Who knows how speculation and reality play out?" he said.

TUI Travel said it made an operating loss of GBP£109 million (USD$172 million) in the first quarter to end December, compared with a GBP£86 million loss the year before.

Tour operators traditionally make a loss in the half of the year which does not include the key summer travel period.

(Reuters)