Last year was marked by transition: after a period of standstill, airlines, hotels and tourism companies made a successful new start. What has changed for TUI as a result of the pandemic? CEO Friedrich Joussen explains what is new, what remains – and why there are good reasons for optimism.
How does TUI rate the 2021 season in tourism?
The reboot after Easter and the summer season were successful for TUI. This shows also in the results. Of course, 2021 was a transition year. The late restart, some European source markets lifting restrictions in our fourth financial quarter only, not all destinations being permanently open – this required a lot of flexibility. Like no one else, TUI delivers this flexibility, because we have all steps of the value chain inhouse and can take fast and coordinated decisions. When we open hotels in a destination, we set up the flightplan, we have the aircraft to operate the destination and the teams on site to look after our guests. Everything meshes together. This is important for the guest and our service, and it is economically efficient. The good news for 2021 is: the market is intact, the COVID-19 pandemic has not changed that. Holidays are extremely important for people. Bookings in the fourth quarter were, as expected, around 50 % of a normal booking year. Despite the challenging environment, Hotels & Resorts and the Central and West regions were able to achieve positive results for the first time since the beginning of the pandemic. This once again demonstrates the benefits of our integrated business model. Our hotel partners and all the companies operating in tourism have enabled people to enjoy a safe, relaxing holiday. We want to say thank you – to our guests for their loyalty, to our colleagues for their great commitment and to our hoteliers and local partners for being so professional and hospitable.
What are TUI’s expectations for the 2022 season?
Looking ahead to the 2022 summer season, we are positive. The indicators and trends are intact, summer 2022 is well booked and currently in line with capacity expectations. Presently, at the end of 2021, we are seeing the fourth wave, among others in our home market Germany. At the same time, many countries in southern Europe are very stable, with low incidences and high vaccination rates. These are destinations that were also well booked and very safe last winter. However, it is crucial to look ahead to spring and summer 2022. It is still too early to make a real forecast for the 2022 summer season. But we are optimistic that tourism will be able to recover to 2019 levels next summer. At the same time, we also know from 2021 that bookings will be made much later and at shorter notice. Bookings for summer 2022 from all TUI markets are already very encouraging.
What new trends in travel behaviour have you been seeing since the pandemic?
One major, lasting trend is customer demand for higher-value travel and more add-on services. Holidaymakers are willing to spend more money on, for example, room upgrades, a higher quality hotel or individual, authentic experiences. There has also been a slight increase in the average length of stay. At the moment we are seeing a strong shift towards the Mediterranean countries. We expect recovery in the long-haul business to follow a little later. But the long-haul destinations are on the way back, including North Africa and the Cape Verde Islands.
What hasn’t changed, in your view?
Tourism is and will remain a strong growth market. It benefits from overarching social trends that are already very evident today and will intensify in the long term: People are getting older, they are healthier and live more consciously. Many have the financial means and make a conscious decision to travel. For many people, experiences and encounters are more important than property and possessions. You could say that experiences are the new luxury. People want to experience special moments. That is the holiday, the hotel or the cruise segment. Travel benefits from this. The pandemic has merely hit a pause button, but the trends are unbroken and continue.
What plans does TUI Group have for investment? Has the pandemic changed those plans in any way?
We will press ahead with our asset-right strategy, which we launched back in 2019 before the pandemic crisis began. That means more hotels to be operated by us, fewer hotels under our ownership. We are a hotel company, not a real estate company. The growth of the Group and its hotels will no longer be linked to investment. We are separating hotel management and the holiday experience from the ownership of real estate. The merits of the business case have been demonstrated globally by city hotels. With over 400 hotels, TUI is the global leader in the holiday hotel sector. For the customer experience, it’s the brand and the quality of hotel that matter, not whether the property belongs to us. We will carry on creating a personalised hotel experience for our guests, and that can be done just as well through management contracts. We are on the look-out above all, for long-term strategic partnerships and we also give consideration to working with institutional investors. Basically, our growth plans include holiday hotels in Europe, East Asia, Africa and the Caribbean.
But you are also looking to transformation and digitalisation. Where does TUI stand there?
We began early to transform TUI from a vertically integrated tourism group into a digital platform company. That was already important before the crisis and was pushed forward massively. An extremely important building block is our business segment Activities and Experiences. We see great potential for the future there. As I said before, experience is the new luxury. We are active in more than 100 countries around the world, we connect the experiences of the world and the demands of the customers. For our own businesses and as a partner for third parties. Through the acquisition and integration of Musement, we have developed a strategic business area. The integration of Musement is complete and is delivering excellent results. The experiences platform is now so scalable and robust that other major travel portals are also using it for their customers.
Lots of destinations are looking to sustainability and quality, but that puts the price up. Does that fit in with your plans or does it reduce the number of people taking holidays?
Sustainability and quality are an important component in our strategy. We have invested in new aircraft, commissioned new cruise liners, and over 80 per cent of our hotels have been certified as sustainable. In 2019 we already cut out more than 250 million plastic items across all operations. The important thing is to protect the environment at the destination while enabling local people and local businesses to derive economic and social benefits from that. The way I see it, social and environmental sustainability belong together. I liked the motto they chose for the G20 summit: ‘People, Planet, Prosperity’. Our sustainability agenda is called ‘People, Planet, Progress’. Progress stands for moving forwards and the measurable advances that we want to achieve year by year. I look at greater sustainability and further transformation as entrepreneurial opportunities, not as a consequence of political regulation. We at TUI aren’t starting out from scratch, but building on our programmes and successes of the last few years. TUI has always attached great importance to sustainability. Not only the company, but in particular our employees. At the same time, it is important to me that we do not outdo ourselves with promises, but set measurable targets, make conscious decisions and then make real progress. The decisions of recent years to invest in a modern, CO2-efficient aircraft fleet have been made in this way, and the reduction of plastic parts has followed the same logic.
How are you organising the disposal of interests to the Riu Group? What impact will it have on customers?
None at all. TUI still holds a 50% stake in Riu. The core is and remains the successful 50:50 joint venture held by the Riu family and TUI, the hotel company. The operation and marketing of all Riu hotels, 100 of them around the world, all take place under that roof. Nothing changes for our guests, and Riu – just like in the past – makes a substantial contribution to earnings in the TUI hotel segment. The changes have affected a second branch, essentially a company engaged purely in owning real estate, which managed 21 properties. TUI held a 49% minority stake in that real estate company. The Riu family have now taken those properties over completely. The sale has already been concluded several months ago and it has no impact on operations. Those 21 properties are still being operated and marketed by our joint hotel venture. For a hotel operator, owning the property is not the decisive factor. In fact, it tends to be the exception with big hotel brands. What counts is the management, the marketing, the design of the hotel and holiday experiences, and the hotel brands. Nothing has changed there at Riu and TUI.
No doubt, 2020 and 2021 are bound to enter history as pandemic years. What about 2022?
Following the transformation and restructuring of our business segments, and the reboot in tourism over the last few months, our focus is now on refinancing and reducing the drawdown of public loans. We want to, we can and we will find our way back to economic strength. We are working on this relentlessly. The new TUI will be leaner, more digital and more efficient. But it will continue to set standards in tourism in terms of quality, innovation, and sustainability. What makes us unique is our enthusiasm for what we do: creating holiday experiences for our customers. The desire for this will be greater than ever after two years of pandemic. This also makes all of us at TUI optimistic for 2022.