TUI to Pull Back in Online Travel While Adding Hotels and Ships

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TUI AG will cut back online activities and expand in hotels and cruise ships in a plan to increase profit over the next three years.

TUI will add about 60 hotels and four cruise ships and sell some online travel activities as it plans to lift underlying earnings before interest, taxes and amortization by an average of 10 percent in each of the three years though 2018, the Hanover-based company said Wednesday.

The German company that merged with Crawley, England-based TUI Travel Plc last year will sell its LateRooms online service in the U.K. and may also divest the MalaPronta online travel agency in Brazil, Co-Chief Executive Officer Friedrich Joussen said on a call. TUI has also said it will wind down its booking portal. Such online retreats may damage TUI’s potential for growth, said Ken Odeluga, a senior market analyst at City Index in London.

“The big news from TUI is that it has agreed to sell LateRooms, admitting it is unwilling or unable to lift its online travel activities to the scale they would need,” said Odeluga. “These activities at TUI are not marginal, and companies like online travel agent Expedia are hugely successful in that area.”

The shares fell as much as 3.8 percent, the biggest intraday drop since Jan. 27. The stock was down 2.7 percent at 1,219 pence as of 1.41 p.m. in London, valuing the company at 7.16 billion pounds ($11.2 billion).

Earnings Forecast

TUI plans to hold on to its Hotelbeds service, which offers beds at more than 50,000 hotels worldwide to business customers including online and traditional travel agencies and airlines. That business leads its industry, and will increase underlying operating profit by as much as 20 percent a year, the company said.

TUI reiterated that its underlying operating profit will rise by 10 percent to 15 percent in the fiscal year ending Sept. 30.

The company reported an underlying loss before interest, taxes and amortization that narrowed to 167.8 million euros ($189 million) in the three months through March from 201.6 million euros a year earlier, as integration with TUI Travel progressed faster than expected.

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