Weak economy is not impacting sales, says TUI

The weakening UK economy is not impacting holiday sales, TUI claimed today.

Speaking to investors, TUI Travel chief executive officer Peter Long said current trading is encouraging, with consumer demand for holidays strong across source markets, including the UK.

“Market research indicates that weakening economic
performance is not a driver of consumer spending on holidays and this is being confirmed by our current trading results,” he said.

“Consumers continue to view overseas travel as an integral part of their annual expenditure, a fact validated by the results of our annual survey of customers’ attitudes on overseas travel and
spending.

“The survey confirmed that 85% of our customers are anticipating spending at least the same as last year on a holiday, and 90% said that they would not choose holidays as the primary area on which to cut spending.”

TUI said with both winter 07/08 and summer 08 programmes, the “strong rate of sale achieved at the start of the season, coupled with significant reductions in capacity in the UK and Germany”, means the groups has less product left to sell than at the same point last year.

It said trading in the UK has remained buoyant, particularly in the key booking period in the four weeks since Christmas, with margins up compared to the same period in 2007.

“Since Christmas, we have experienced strong demand for our range of differentiated holidays across both First Choice and Thomson with sales of Thomson Platinum up 84% and First Choice Premier up 25% in the four weeks since the holiday break,” said the trading statement.

“Our medium haul and long haul programmes continue to outperform the market with sales up 23% and 6% on higher volumes of 14% and 6% respectively, with Turkey, Greece, Egypt, the US and Mexico all performing strongly.”

The group said total UK capacity is down 14% and capacity for the peak season of July and August remains broadly flat.

“We anticipate stronger demand following the poor summer weather in 2007. In short haul, where capacity is down by 25% (primarily within scheduled flying), sales are down 3% on lower volumes of 14%.

“The total UK programme is four percentage points further sold
than last year, with load factors ahead for all departure months in the season.

“Overall, this results in us having 18% less product left to sell compared to prior year and despite ongoing cost pressures such as fuel, margins remain ahead of prior year.

“In the specialist sectors, even though it remains early in the booking cycle, demand for our portfolio of destination specialist, escorted tours, sailing and adventure holidays has been strong, while our online B2C and B2B distribution channels also continue to perform well.”

Outlining trading for winter 07/08, TUI said all businesses are performing in line with our expectations.

“In UK mainstream, trading has remained strong with total sales up 4% on lower volumes of 6%. Total capacity is down 11%, primarily as result of significant cuts within our short haul programme and the loss making scheduled flying ‘city pairs’ operation of Thomsonfly. This results in us having 16% less product left to sell compared to prior year.

“Demand for medium haul destinations such as Egypt and Cape Verde remains strong with sales up 16% on higher volumes of 6%.

“Total long haul volumes are down 5% since Thomson significantly reduced its winter long haul programme (capacity down 17%) prior to merger completion, while First Choice has successfully continue to build its programme with sales up 14% on higher volumes of 7%.

“The total UK programme is now three percentage points further sold than last year, with load factors for January and February significantly ahead of last year.”

By Bev Fearis