Hanover, 13 February 2018

Good start to financial year 2018 – Growth in customer numbers and turnover in Q1 / New growth segment defined: Great potential for TUI Destination Services

  • CEO Fritz Joussen: “We reiterate guidance for 2018. Aiming to deliver operating result growth of at least ten per cent. Hotels and cruises continue to grow. We are planning to expand TUI Destination Services as a business segment.”
  • Q1 2018: Underlying EBITA up 57.9 per cent1
  • Customer numbers up 4.4 per cent in Q1, turnover up 9.1 per cent1
  • Guidance for 2018 reiterated: At least 10 per cent1 growth in operating result
  • Continued expansion of hotels and cruises
  • Cruise fleet: New build Mein Schiff 7 ordered for TUI Cruises – Delivery in 2023
  • Outlook for Summer 2018: Very good trading performance fully matches our expectations

“Q1 2018 has shown that TUI is on track, we continue to grow. Following three consecutive years of double-digit earnings growth, we are aiming to deliver similarly strong growth in 2018. That is why we are delighted about our very good Q1 performance. Turnover climbed by 9.1 per cent1 and we increased our customer numbers by 4.4 per cent year-on-year,” said CEO Fritz Joussen. In the first quarter (1 October to 31 December 2017), companies operating in the tourism sector record an underlying EBITA loss reflecting the typical seasonality of the sector. This also applies to TUI, which, however, reduced this seasonal underlying EBITA loss by more than half (57.91 per cent). “Our strategy is successful. Our focus is on hotels and cruises. While we used to be a trading company, we have now become developers, investors, and operators. This makes TUI more profitable, and we now generate our earnings more evenly across twelve months. In the completed financial year, our hotels, cruise businesses and Destination Services delivered 59 per cent of our underlying earnings. And we continue to invest in digitalisation: It helps us enhance our Group’s efficiency and offer our customers relevant, tailored products and services. Thanks to the use of the blockchain and our own Yield Management system, we manage our bed capacity considerably more efficiently, and our CRM systems allow us to gain a single view of the customer and deliver individualised offers”, said CEO Fritz Joussen at the presentation of the Q1 results in the framework of the Group’s Annual General Meeting in Hanover.

TUI Destination Services as an independent reporting segment
TUI aims to increase its turnover and earnings in particular at TUI Destination Services, which looks after TUI customers and pools all services such as transfers, activities and excursions in the holiday destinations. The sector has been defined as one of TUI’s strategic growth areas. “Here, we see great potential to grow through the strength and comprehensive presence of the TUI brand. We know our customers. Our customers know us, and they trust the TUI brand. This should help us develop more and better service offerings and generate additional turnover,” said Joussen. There is a wide variety of offerings, both before, during and after the journey. Modern CRM (Customer Relationship Management) systems will be used to develop tailored products for the customers and generate additional turnover. In order to underscore the relevance of the segment, TUI Destination Services is no longer carried under ‘Other Tourism’ in the Group’s reporting, but is shown as an independent segment alongside hotels and cruises.

TUI Destination Services organises 24 million transfers and 4.6 million excursions and tours for more than 12 million customers of the Group every year. The sector is growing and operates in 115 destinations worldwide with around 1,000 vehicles and 6,500 employees.

Overview of Q1 2018
In the period under review (1 October to 31 December 2017), TUI Group increased its turnover at constant currency by 9.1 per cent to 3.58 billion euros (previous year 3.28 billion euros). Including foreign exchange effects, turnover also climbed substantially at growth of 8.1 per cent. Underlying EBITA at constant currency improved by 57.9 per cent to a seasonal loss of 25.4 million euros (previous year -60.3 million euros). Including foreign exchange effects, it improved by 58.7 per cent.

Overview of the segments – Holiday Experiences

Hotels & Resorts: strong performance
Hotels & Resorts nearly doubled its operating result in Q1 2018. The segment benefited from a number of factors including an overall increase in average occupancy of the hotels and better rates. It also adjusted and streamlined its portfolio: The segment posted gains on disposal of 38 million euros from the sale of three RIU hotels.

  • Underlying EBITA: +91.9 per cent to 94.4 million euros (previous year 49.2 million euros)
  • Underlying EBITA at constant currency: +83.5 per cent to 90.3 million euros
  • Average revenue per bed: 65 euros (previous year 63 euros)
  • Average occupancy: 75.1 per cent (previous year 72.6 per cent)

In Q1 2018, five new hotels opened under the core brands of TUI Hotels & Resorts, including a RIU hotel in Mexico, a Robinson Club each in the Maldives and Thailand and two Blue Diamond hotels in Punta Cana, Dominican Republic. Furthermore two non-core brand hotels in Tunisia have been opened.

Cruises: Growth path successfully continued, new build Mein Schiff 7 ordered for delivery in 2023
The Cruises segment continued its growth path in the period under review with a significant increase in its underlying earnings:

  • Underlying EBITA: +33.5 per cent to 37.5 million euros (previous year 28.1 million euros)
  • Underlying EBITA at constant currency: +34.5 per cent to 37.8 million euros
  • Average rate per passenger per day:
    • TUI Cruises 149 euros (previous year 143 euros)
    • Marella Cruises 129 GBP (previous year 122 GBP)2
    • Hapag-Lloyd Cruises 533 euros (previous year 549 euros)
  • Average occupancy:
    • TUI Cruises 98.9 per cent (previous year 99.5 per cent)
    • Marella Cruises 101.0 per cent (previous year 101.2 per cent)
    • Hapag-Lloyd Cruises 75.5 per cent (previous year 71.3 per cent)

Due to the continued growth in demand, TUI is planning to expand the segment with an additional new build of the Mein Schiff fleet. A sister vessel to the new Mein Schiff 1 and Mein Schiff 2 will be built at the Finnish Meyer Turku shipyard with a capacity of up to 2,894 passengers. Mein Schiff 7 is scheduled for delivery in 2023.

In June 2017, Mein Schiff 6 joined TUI Cruises’ fleet. TUI Cruises will launch the new Mein Schiff 1 in May 2018. Marella Cruises has also modernised its fleet: Marella Discovery 2 was launched in May 2017, while Marella Majesty left the fleet in the period under review.

Destination Services
In the period under review, TUI Destination Services delivered a good operating performance, delivering growth in arrival customer numbers (+3 per cent) and the number of excursions (+2 per cent).

  • Underlying EBITA at constant currency: +1.1 million euros

Sales & Marketing: 4.4 per cent growth in customer numbers across all regions, 8.2 per cent growth in turnover by the regions
The Sales & Marketing companies in the source market regions recorded a good operating performance in Q1 2018, in particular in the Nordics and Benelux. Customer numbers grew by 4.4 per cent across all regions, while total turnover climbed by 8.2 per cent to 3.03 billion euros (previous year 2.80 billion euros).

  • Underlying EBITA for all regions: -3.1 per cent to -133.4 million euros (previous year -129.4 million euros)
  • Underlying EBITA for all regions at constant currency: -2.9 per cent to -133.1 million euros

Northern Region (UK & Ireland, Nordics, Canada, Russia) delivered a substantial increase in its earnings. The growth was attributable to various factors including a very good trading performance, the use of the Group’s own centrally launched Yield Management and CRM systems and the migration from the local brand to the global TUI brand. In the UK, demand for TUI holidays remains strong and the rebrand is progressing very well. Brand migration from the local Thomson brand to TUI resulted in rebrand costs of 17 million euros in Q4 of the completed financial year, carried in the reporting period.

  • Underlying EBITA Northern Region: -6.1 per cent to -31.1 million euros (previous year -29.3 million euros)
  • Underlying EBITA Northern Region at constant currency: -5.5 per cent to -30.9 million euros

Central Region (Germany, Austria, Switzerland, Poland) recorded a strong increase in customer numbers: In the period under review, 1.364 million guests in that region travelled with TUI, an increase of 8.2 per cent versus the previous year (1.261 million). Germany reported a very strong operating performance at growth of six per cent in customers. Aviation recorded two effects nearly offsetting each other in the period under review: On the one hand, the sector benefited from the non-repeat of one-off costs that had arisen in the previous year from the sickness incident in TUI fly (benefit: 24 million euros), while on the other hand, it carried a write-down of 20 million euros on a receivable from a wet lease contract as a result of the insolvency of the Niki airline.

  • Underlying EBITA Central Region: -7.6 per cent to -56.4 million euros (previous year -52.4 million euros)
  • Underlying EBITA Central Region at constant currency: -7.4 per cent to -56.3 million euros

The result generated by Western Region (Belgium, Netherlands, France) was driven by a good performance in Belgium and the Netherlands. Benelux recorded an increase in customer numbers of six per cent. Moreover, Belgium benefited from the non-repeat of the costs incurred for the migration to the global TUI master brand in the previous year. France reported a year-on-year decline in its earnings, driven by the inclusion of the losses for a full quarter of the Transat company acquired in October 2016.

  • Underlying EBITA Western Region: +3.8 per cent to -45.9 million euros (previous year -47.7 million euros)

Very good trading performance – current Summer programme continues to match our expectations
The current trading performance for Summer 2018 (as at 4 February 2018) is very good and fully matches our expectations. Booking numbers have grown particularly strongly for Greece, Turkey and Cyprus.

  • Source market revenue: +8 per cent1
  • Booking numbers: +6 per cent

on a constant currency basis

2 inclusive of transfers, flights and hotels due to the integrated nature of Marella Cruises