TUI Group to target Brazil and China in global expansion

Thursday, 16 February 2017 00:00 - - {{hitsCtrl.values.hits}}

BERLIN (Reuters): European travel and tourism company TUI aims to start offering holidays to customers from countries such as China, Brazil, Spain and Italy as it seeks new ways to keep its hotels full and drive sales.

TUI has been reorganising its business to invest in more of its own hotels and cruise ships and has been selling off what it views as non-core operations, such as the Travelopia portfolio of specialist holiday brands that it agreed to sell on Monday.

Chief Executive Fritz Joussen said on Tuesday that TUI sells holidays to southern Europe but does not take customers from those countries on holiday, while emerging markets such as China and South America offer greater potential for new customers.

“It’s about nothing more or less than the global expansion of our brand,” he told shareholders at the company’s annual general meeting in Germany, saying that TUI is targeting an additional one million customers and one billion euros ($ 1.1 billion) in revenue within the next five years.

Joussen said that TUI would focus on its online sales to minimise costs and would also direct customers to its own hotels in places such as the Caribbean and Thailand to minimise risk if it proves impossible to build up the business in new markets.

“Many have entered China and come back with a bloody nose. This should not happen to us,” he said.

The Chinese market has proved a difficult proposition for foreign travel groups and TUI has previously set up a joint venture with little success, but Joussen said that an increasing number of Chinese holidaymakers is changing the landscape.

China options

Joussen did not indicate how TUI would implement its plans, but Euromonitor senior analyst Wouter Geerts said that other companies have expanded in China by investing in local players.

Geerts pointed to US group Priceline’s move into China through Ctrip and said that said that TUI could also look at how hotel groups such as IHG have set up Chinese brands.

TUI earlier reported a first-quarter loss of 66.7 million euros ($70.9 million) – a 17% improvement on last year – and reiterated its forecast for core earnings to rise by at least 10% this year.

Tourism companies typically make losses during the winter months, and the combination of TUI’s year-on-year improvement and the Travelopia sale helped to lift its shares by 4.9% to 12.14 pounds by 1153 GMT.

Rival Thomas Cook last week gave a cautious outlook for its financial year, but Joussen said that TUI’s summer bookings from the UK were up 3% on last year on revenue up 12%.

Joussen said that the revenue jump was largely because of higher prices and customers spending more to travel further afield.

“Higher prices are necessary because of the depreciation of the British pound. You need higher prices to cover higher costs in destinations,” he said. ($1 = 0.9408 euros)