In 2022 TUI put the Covid crisis of recent years behind it. Last year‘s positive development brings momentum for the future – even in times of geopolitical and macroeconomic challenges. Today the Group is leaner and more efficient than ever. Sebastian Ebel, Chief Executive Officer since October 2022, tells us where the company is now placing the focus and what he expects for the future.
In the completed financial year 2022, TUI put the Covid crisis of the last few years behind it. You were heavily involved in that crucial period as CFO and since the start of October you have been Group CEO. How should we rate this financial year for TUI?
Basically we didn’t really kick off operationally until the summer began. The first six months were still very much under the influence of the Covid restrictions. There is also Russia’s war of aggression against Ukraine. But in summer we got off to a great start. It was a strong Summer season for us, especially in the fourth quarter. In Q4 our adjusted earnings hit the billion euro mark. Taking the year as a whole, our figures are significantly in the black, with € 409 million in adjusted EBIT. We announced that we would do that and we delivered. Apart from that, our finances are solid and we had a strong cash flow, so in summer we didn’t have to draw on the KfW credit facility either. That positive development gives us strong momentum for the future, even in times that are going to stay challenging for geopolitical and macroeconomic reasons. We are entering a new phase for TUI. The strategy is in place – and now we are going to implement it. We want to grow profitably again.
But the German government is still engaged with TUI via financial assistance in various forms, with a Silent Participation, a warrant bond and credit lines amounting to about two billion euros. How much crisis does TUI still need to work off?
We have surmounted the existential crisis, it’s behind us. Of course, we still have homework to do as a consequence of the pandemic, further cutting our debt, refinancing, strengthening the balance sheet. But our operational focus is set clearly on returning to profitable growth. We are gradually pruning back the state engagement – the agreement with the ESF and the planned capital increase to follow the AGM are the next logical steps back to normality and complete financial independence. The pandemic confronted the whole sector with the crisis of a century and without those government bail-out packages TUI would hardly have survived. We are grateful for that support. However, if you look at how much we actually drew down from those packages, you can see that we have come through the crisis in robust shape. The credit lines are like a bank overdraft – you can make use of it but you don’t have to. Whatever happens, it gives you extra security in a difficult situation. TUI didn’t receive any gifts from the state. We pay interest on any drawdowns. In the end, the engagement paid off well for the public budget and the taxpayer. By the end of our financial year alone, the German government has received around € 300 million in interest from us.
Let’s take another look back. Summer turned out much better than originally expected. But not every player in tourism was ready for that …
All of us – TUI, hotels, cruise lines, airlines and many other partners – have a fantastic mission: our customers trust us with the best time of their year. We get to design their holiday and to accompany them. I’ve been in tourism for many years now, and to me that still feels like a particular privilege. It motivates me afresh each day. But naturally it also brings responsibility. This summer, unfortunately, not all our partners were equally well prepared for the travel period. The overwhelming majority of TUI holidays ran smoothly for our guests but there were a few dissatisfied customers. In the UK, for example, at the start of the Summer season there was disruption to almost 4% of our flight schedule. Bottlenecks were the ground handling services and security checks at airports. The latter task is run by the state, but it needs to invest in more people and new technology and put them to good use. Quite rightly, our customers have great expectations of their holiday experience with TUI. And our ambition is not just to meet those great expectations but to surpass them. I am sorry that this summer we didn’t always manage to do that. Our teams made up for a lot. Our staff demonstrated the true TUI spirit so as to keep the impact to a minimum for customers. That’s why I want to extend a warm thank you at this point to our colleagues who gave their all for our customers over the summer, often in adverse circumstances – whether in the travel agencies, in the call centres, at the airports, on board our planes and ships, locally in our hotels and destinations, or in other fields.
Let’s talk about your new role. What were the first things you did as the new CEO of TUI? What will stay the same and what will be different under Sebastian Ebel?
TUI was a very successful company before Covid. We had built up a highly successful commercial hotel and cruise business and expanded hugely. The number of hotels we run under our own TUI hotel brands has risen in the last nine years from nearly 200 to about 400. TUI invested capital and paid handsome dividends. We were an attractive investment and we will be again. No company can make provision for its business being put completely on hold for two years. Really, we should have been able to see the success of our truly massive transformation reflected in our business data for 2019 and 2020. But then we had first of all the temporary suspension of the Boeing 737 Max in 2019 and then in 2020 the pandemic. We used the pandemic to set ourselves up as solidly as possible for the time to come. Today TUI is leaner and more efficient than ever. The aim now is to implement the measures we agreed on properly and very swiftly. That’s where my focus lies, that’s where our focus lies as a team.
Where is the growth to come from – existing business areas or new ones?
Both. In the Markets & Airline segment we plan to gain market share. Our product portfolio will expand significantly. The classic package tour is becoming more diverse and more flexible. We do “dynamic” packaging by combining cheap flights with available hotels, even at short notice. That way we can create new products that people didn’t tend to come to TUI for in the past, like city breaks. In addition, we will be offering certain travel products as stand-alones, such as hotel stays, flights, car hire, but also, of course, the activities and experiences provided by TUI Musement. That includes excursions in a holiday destination, but also, for example, tickets for a local museum. The formula is: new products, additional customers, increasing market share. For customers that means more choice, more personalised options and greater flexibility. TUI will be their partner for holidays, leisure and experiences – not only when they are travelling, but in their home countries too.
Reading the strategy section in this Annual Report, the concept “holiday experiences” crops up a lot. What does it mean and what are your plans for that segment?
I was personally in charge of those activities until I took over as TUI’s CFO in 2020, so I was able to forge them into a growth segment for TUI together with the teams from Hotels, Cruises and Musement. What we do there is pool all the holiday experiences “made by TUI” – our Hotels & Resorts, our cruise liners and the tours, excursions and activities that we create and curate in the destinations. So this is where we design the unique TUI holiday experience for our guests. The aim is to expand this differentiated product portfolio with our strong brands. In the last ten years the segment has come on extremely well and now it is one of the growth drivers in the Group. We intend to build on that. Unique holiday products combined with the distribution power in our source markets – online and in the travel agencies: in future that will be the basis for our profitable growth.
How does that work with TUI hotels?
In the Hotels & Resorts segment we want to carry on growing – both with the successful hotel brands we already have and by launching new brands to broaden our portfolio further. We are looking at destinations where we already operate – but also of course at places where there are no TUI hotels yet. This growth is based on what we call our asset-right approach, which means that we don’t have to actually own the real estate in order to manage a TUI hotel successfully. We are building on our portfolio by means of our joint ventures, the recently created TUI Global Hotel Fund and the expansion we are pursuing along with management and franchise partners. TUI should develop as other big hotel chains are doing. Hilton, Marriott and Hyatt, for example, don’t usually own the hotel buildings. They design and manage hotel brands, hotel experiences. That is the skill that we and our partners bring.
And in cruises?
We are growing there too, especially with the new vessels that have been announced by our very successful joint venture TUI Cruises. Those investments, by the way, were agreed before the pandemic. At the same time we want to rejuvenate the British Marella fleet and to cap it all we will use a multi-channel distribution strategy to boost the earnings and occupancy rate of all our liners.
A portfolio of hotels and ships can be expanded by acquiring new assets, but what about TUI Musement? Where does the growth come from there?
Experiences are a global trend – people want to experience things rather than own things. We can offer our customers an infinite number of experiences and activities – while they are travelling of course, but at home too. From an evening at a musical or a visit to a museum to a family outing at a theme park or an e-bike tour in their own town. With its digital platform TUI Musement will be building hugely on its range of products so that it can cater for the growing customer demand for experiences. TUI Musement will be a partner at the holiday destination, just like at home. Take leisure activities: TUI Musement will have attractive products to offer on 365 days of the year, not just during the fortnight spent on holiday.
You also want to take more care of customers in future, to place them more centre stage?
They already are centre stage. After all, we sell them unique experiences, their “best time of the year”. That is the core of our brand. But we can personalise things more and make them more user-friendly by simplifying the customer experience in the digital sphere – for example, by giving people a single customer account, harmonising the payment procedure and pitching all our TUI products together, including flights and hotels. The linchpin of all this is our TUI App. This onestop customer management system enables us to link our strengths across all segments and generate additional growth. That enhances the customer experience – and with it the business. It is a win-win situation. That is a focus. In future our work will be app-centred: one app, one click, but with the full diversity of our product and brand universe.
TUI is a people business. You sell experiences, special moments. And there are always real people behind that to make it happen, TUI people. What role do they play in implementing the Group strategy?
The team makes the difference – our people are key to TUI’s success. Customers don’t deal with “TUI” or with management. Customers experience TUI through our employees in distribution, on the plane, on the ship, at the hotel or during the excursion, or through the local reps in our destinations. They are the hosts who define our customers’ holidays. And they do that with passion and tremendous commitment. That’s why it matters to me that we make it clear who we want to be as a company and what it means to work for TUI. It’s about culture, diversity, opportunities, and even the way we work. That includes mobile and flexible working, the right technical equipment. But also “TUI Workwide”: people in roles that allow for it can spend up to 30 days a year working from another country. It’s been a success story for us: more than 1,000 TUI employees have already spent 14,500 days working from abroad. It creates better understanding for other cultures and countries and often makes it easier to reconcile family and career. The modern world of work relies more than anything on a culture of trust. That is also the basis for “TUI Workwide”.
Another important aspect is diversity ...
… and that means a lot to me! Our employees can “come as they are” at TUI. They are confirming that to us in the surveys. Contributing different perspectives and accepting them might perhaps be harder work, but it broadens our horizons and results in novel solutions, often much better ones. We must make good use of that potential.
You yourself raise the issue of sustainability at almost every meeting. Do you think TUI is lagging behind?
For years now TUI has been a pioneer on sustainability. But it isn’t enough to rest on your laurels because the challenges are getting bigger too. We have to break out of the vicious circle whereby growth means more emissions. We have set ourselves ambitious targets for every segment, we have committed to the Science-Based Target Initiative and we will provide regular, transparent progress reports. In some areas, such as our hotels and office buildings, we will achieve our goal of cutting carbon emissions quickly. Technology is advancing fast here. At our new TUI Campus in Hanover, for example, we will generate most of our power from photovoltaics. That investment will pay off within very few years. The sustainability goals that we have defined for ourselves will require effort, but we will achieve them. The important thing is to tackle the challenge with determination and take a holistic view of sustainability in all its dimensions – environmental, social and economic. For us sustainable transformation is not a threat but an opportunity.
How are you going about this sustainable change? Can you give us an example?
On Rhodes we are currently working on the blueprint for a sustainable destination together with the South Aegean administration and the TUI Care Foundation. We are already getting enquiries from other destinations. They often refer to the formal or legislative framework, Green Deal, Paris Agreement, rules, requirements. But is that the only reason we are doing it? No, it’s a matter of conviction, attitude. We have to recognise that more sustainability and the path to climate neutrality present genuine opportunities. We are working on that in the company. That’s also why I want us to fulfil our targets ahead of the required date. 2050 is definitively too late.
Every CEO fosters a personal style of leadership. How do you go about winning people for the journey? And what do you expect from your crew?
I think it’s important to give people space and the right resources for their project. Naturally, that comes together with a duty to meet targets as effectively as possible or to speak up if something can’t be achieved as planned. A red light on a project dashboard is only a problem if people don’t talk about it and put their heads together to set it right. I value a culture of open exchange. But I believe it is equally important to also deliver. We must deliver on what we promise. Strategies are fine but implementation is the key to success.
How optimistic are you looking ahead?
Summer 2022 was very encouraging. Even though the restrictions were lifted late, our bookings were at a good 90 per cent of the 2019 level, so almost the volume we had before the pandemic, while our average earnings were significantly higher. We can see the same trend for Winter. Travelling means a lot to people. The figures show that our model is intact. We have defined the growth areas. We have a clear strategy and we are putting it into practice. For many years I held an office in professional football and in a recent interview with a daily newspaper I put it like this: It is far cooler to win than to draw or lose. Or to quote the claim coined by our HR Director: Let’s TUI it!