TUI Travel profits from the escape to the sun

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Thomson and First Choice parent company TUI Travel hailed an “outstanding” year for its UK business yesterday after the package holiday made a comeback.

The firm said strong bookings for more profitable “unique” holidays, targeted at groups including couples and those looking for luxury all-inclusive resorts, drove a record performance, with UK underlying annual earnings jumping 32 per cent to £197m.

UK holidaymakers looking to escape to the sun after this year’s dismal summer also resulted in a surge in bookings for next summer, up 12 per cent.

TUI said its unique holidays –including Couples, Sensatori and SplashWorld – were already up 18 per cent for summer 2013, accounting for 83 per cent of bookings.

Peter Long, chief executive of TUI Travel, said the year had been one of “many successes”.

“We have delivered record group profits while the UK achieved outstanding results both in terms of profit and margin all against a backdrop of continued economic uncertainty,” he added.

A hike in the price of its holidays and cost cutting efforts also buoyed figures, helping group-wide underlying pre-tax profits rise 8 per cent to £390m in the year to September 30.

In the UK, TUI increased prices by 4 per cent this winter and 3 per cent for next summer, while it made £4m in savings over the year.

Mr Long said the group was aiming for ongoing earnings growth of between 7 per cent and 10 per cent a year.

Peel Hunt analyst Nick Batram said he would likely upgrade his profit forecasts for TUI Travel after the strong results but highlighted a lack of growth at its more profitable specialist holidays unit as a worry.

“The irony is that it is mainstream (holidays) driving profits rather than the more specialist businesses... whilst earnings are moving forward the quality of those earning is questionable,” he said.

Bookings during the year were up across Britain, Germany and the Nordic region, but fell 28 per cent in France as the firm reduced capacity in the country.

France also suffered because of a slower than expected recovery in North African markets, which are popular among French travellers.