A travel operator with a very sunny outlook
Holiday sales are providing resilient and this company is becoming a premium brand
It seems not even a cost of living crisis can dull the appeal of a beach holiday for the sun-starved people of the UK. Tour operator Tui (TUI) reported in January that summer bookings had exceeded pre-pandemic levels. Meanwhile, easyJet (EZJ) said that it had sold more than 60 per cent of its summer package holidays before the start of February. The travel industry itself was not expecting a rebound of this magnitude – and it’s not entirely possible to pinpoint the factors that are driving it.
Despite the cheerful news included in its January trading update, TUI is still having to issue new shares to pay back a pandemic-era loan from the German government. “Tour operators are more at risk if [business] goes belly up,” said Alex Chatterton, an analyst at investment bank Panmure Gordon. “With On The Beach, 40 to 50 per cent of its expenses are marketing, which is obviously a variable cost. [Management] can just turn off the tap.” Cutting spending is naturally more complicated for airlines, which have far larger workforces and greater fixed costs.
Author: Jennifer Johnson, investment writer, Investors’ Chronicle
Director, Research Analyst, Consumer & Leisure