TUI Sells Three Robinson Clubs Sites in Hotel Unit Review

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TUI AG sold three Robinson Clubs hotels as part of the German travel company’s review of lodging assets in an effort to boost earnings.

The sale of two sites in Switzerland and one in Austria, which Hanover-based TUI will continue to run under a management contract, will generate 10 million euros ($13.6 million) in cash and a “slight” book gain, Chief Executive Officer Friedrich Joussen said on a call with analysts today.

Joussen took over a year ago and started an efficiency plan that includes cutting jobs at the Hanover headquarters, ending sponsoring agreements and consulting contracts and selling the corporate jet, with a target of reaching 1 billion euros in operating profit next year. The push at TUI, which also controls Europe’s biggest tour operator, includes strengthening weaker hotel brands and steering the cruise business to profitability to ensure stable dividends.

“We are looking at our portfolio brand by brand and resort by resort to decide which operating model might work best,” Joussen said, adding that the need to act is higher at the Robinson division than at the Riu group of hotels, where capital efficiency measures are higher.

TUI’s net loss in the fiscal first quarter ended December narrowed to 108.7 million euros from 138.6 million euros a year earlier, the company said today in a statement. The loss before interest, taxes, amortization and one-time effects was almost unchanged at 140.6 million euros.

Essential Brands

Joussen has yet to announce which of TUI’s major hotel brands will remain with the company, so far only marking Riu and Robinson as essential. That leaves the future of more than 100 hotels in question, including the Grecotel, Grupotel and Iberotel brands. Joussen today said that doesn’t mean TUI wants to get rid of them. Seven hotels are currently under review, he said, declining to identify which brands are involved.

At Iberotel, unrest in Egypt, where most of the division’s sites are located, meant the occupancy rate collapsed by 25 percentage points to 43 percent in the quarter. TUI will “carefully grow” the Grupotel chain, which is part of the company’s “backbone” on Spain’s Balearic islands and is performing “very well,” Chief Financial Officer Horst Baier said on the call. At the same time, some asset shifts may happen at the brand.

The return on invested capital was 12.5 percent for Riu hotels and 6 percent for Robinson in fiscal 2013, TUI said in December. The transactions announced today will lift that number at Robinson by 2 percentage points, Joussen said today. The company has declined to disclose the figure for its other hotel divisions.

Keeping Forecasts

TUI reiterated its full-year sales and earnings forecasts, saying revenue will increase within a range of 2 percent to 4 percent, with operating profit gaining 6 percent to 12 percent.

First-quarter sales fell 2.9 percent to 3.39 billion euros because of unfavorable currency shifts. Revenue was pulled down by a 3.6 percent decline at Crawley, England-based TUI Travel Plc, the company’s tour-operating business and its largest unit. TUI Travel reported a sales increase in the period in terms of British pounds.

Revenue in the quarter rose 6.1 percent at TUI AG’s hotel business and 7 percent at the cruise unit, which put a new ship into service. Underlying operating profit at the hotel business declined by 24 percent to 26.1 million euros because of a year-earlier gain from the disposal of a site.

Cruise Divisions

The Hapag-Lloyd Kreuzfahrten cruise unit will break even on an operating-profit basis next year, and “I am far more optimistic for this segment than I was a year ago,” Joussen said. TUI’s broader cruise business, which also includes the company’s share in a joint venture with Royal Caribbean Cruises Ltd., will break even this year, Joussen also said.

Hapag-Lloyd AG, the shipping line in which TUI owns 22 percent, said on Jan. 23 that it agreed to combine operations with Cia. Sud Americana de Vapores SA to form the world’s fourth-largest container carrier. The transaction may include a public stock sale later, the companies have said, potentially enabling TUI to fulfill a plan to dispose of the Hapag-Lloyd stake.

“We have to protect our interest, and we want to exit the business,” Joussen reiterated today.

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