Package holidays operator TUI (TUI) saw bookings for summer 2021 collapse as Covid-19 restrictions on travel forced millions of consumers to rethink their holiday plans.
The struggling company reported a 44% decline in bookings for the coming summer, versus 2019 summer season. TUI is desperately trying to remain optimistic, allowing flexible amendments to travel plans and voucher rebookings, but hopes of retaining 80% of its 2019 summer capacity look increasingly unlikely.
TUI stock barely moved on Tuesday, nudging 0.4% lower to 330.1p, with the bad news already largely in the price. The share price has fallen roughly 25% since the middle of January and has halved in 15-months.
The stock was trading at close to £12 levels less than three years ago.
PRAYING FOR A LAST MINUTE SURGE
First quarter results to 31 December revealed a €2.1 billion jump in net debt to more than €7 billion. TUI has been grappling with ballooning borrowings for a number of years and has had to be bailed out by the German government twice during the pandemic.
The firm said average daily bookings in January were up 70% compared to December, with an expectation of peak booking period still to come, and added that it ‘shares the industry expectation of delayed bookings whilst vaccine programmes are underway, the rollout of which will support the lifting of extensive travel restrictions.’
‘TUI is gambling its fortunes on a last-minute surge for summer bookings,’ said AJ Bell investment director Russ Mould.
He added, ‘Any major delay to rolling out the vaccine to a younger and more active age group could put significant pressure on its finances which are already creaking due to very high debt levels.’
AVERAGE HOLIDAY PRICES UP 20%
Mould also pointed out that another interesting aspect to watch with holiday companies is pricing, given that all the uncertainty over holidays at the moment implies scope for a bargain, yet travel firms need as much income as they can get to recoup the losses of last year.
TUI revealed that average selling prices for its summer 2021 holidays were up 20% compared to 2019, with 2.8 million customers having already booked at this level.
Mould said, ‘While the travel and leisure industry may seem on its knees now, which implies scope for brave travellers to bag a bargain, as soon as the Covid vaccines have been administered to all over-50s there could be a large number of active people ready to travel.
‘It is feasible to suggest that people will pay almost any price simply to reclaim their lives and get their two weeks in the sun.’
