Tui Group continues to predict 10% growth in underlying full-year profit despite the hot summer across Europe.
In a pre-close trading update for the full-year to September 30, Tui said overall, trading since its last update had remained in line with its expectations.
The company said it had benefitted from the return in demand for Turkey, North Africa and increased demand for Greece, as well as delivering new openings in Southeast Asia and the Caribbean.
Demand for Spain was normalising from the “very high levels seen in recent years”, Tui said, and it highlighted its pipeline of hotel openings for FY19, including in “year round” destinations such as Cape Verde, Mexico, the Caribbean islands and the Maldives. Tui still expects to deliver around 60 additional hotel openings by the end of FY19.
Chief executive of Tui Group, Fritz Joussen, said: “The financial year is closing out as we expected, with the fourth consecutive year of double digit growth in underlying Ebita (earnings before interest taxes and amortisation) since the merger.
“Having continued to expand our hotel and cruise offer, occupancies and yields remain high, and the number of customers purchasing holidays from us has grown in all major markets, even with the sustained period of hot weather in Northern Europe this summer.
“This demonstrates the strength and resilience of demand for our holiday experiences, although as previously stated the hot weather has limited our ability to outperform.
“Whilst at an early stage, trading for future seasons is overall in line with our expectations.
“Our strong positioning as a leading holiday product provider with own distribution, as well as our balanced portfolio of destinations and markets, mean that we are well positioned to continue to deliver against our growth strategy. We therefore reiterate our guidance of at least 10% underlying Ebita growth in FY18.”
The company also noted further growth in the proportion of direct and online distribution.
Tui added the launches of the new Tui Cruises Mein Schiff 1 and Marella Explorer this Summer had “gone very well”, and yield performance remained strong across its three fleets.
A dry dock for the Europa means that Hapag-Lloyd Cruises will have a more subdued earnings performance in the final quarter of FY18.
In FY19 Tui will launch three ships – new Tui Cruises Mein Schiff 2, Marella Explorer 2 and Hanseatic Nature for Hapag-Lloyd Cruises – with additional launches scheduled in future years.
Destination experiences also continued to perform very well, Tui said.
Having “expanded its regional capability in destinations” with the acquisition of the destination management business of Hotelbeds Group, Tui recently announced the acquisition of Musement, an online platform for selling tours and activities in destinations around the world.
“This will enable the creation of a scalable digital platform to source, produce and distribute tours and activities to Tui and non-Tui customers,” the company said.
Around one third of Tui’s winter 2018/19 programme was sold, with customer volumes up 2%.
Average selling price overall for sales and marketing was down 1% on the prior year “reflecting a proactive remix of capacity, enabling us to capitalise on the returning popularity of North Africa and Turkey, and also to reduce our capacity to the Canaries where demand is normalising”.
Foreign exchange impact
In Tui’s Q3 update it flagged approximately €35 million in adverse translation impact on underlying Ebita compared with rates the prior year, including the impact from the revaluation of euro loan balances within Turkish hotels.
Since the Q3 update the Turkish lira has further weakened, Tui said, leading to an increase in the revaluation impact. It now expects approximately €70 million adverse impact in total from foreign exchange translation on the FY18 underlying Ebita result.