January 23, 2021

The German tour operator TUI expects a “relatively normal” summer


Correspondent in Berlin

Updated:

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The tourism sector is one of the most affected by the pandemic, but it will also be one of the fastest to return to normal without structural damage. At least that is what emerges from the forecasts of TUI, the world’s largest tour operator, whose president, Fritz Joussen, affirms that the crisis will be followed by a “boom”. He estimates that after the collapse caused by the health crisis, the sector will rebound very strongly this year. “We are expecting a relatively normal summer,” he told the “Düsseldorf Rheinische Post” newspaper. He hopes to start negotiating in January and February with regular suppliers to put his tourist packages on sale in Germany, although he acknowledges that “only around 80% of the flights from pre-crisis years will be offered to ensure optimal use of the means”. During the months of July and August it is likely that many flights on routes in the Mediterranean region will be booked quickly and the offer for May is already booked at 50%.

This deficit of supply and demand in the forecasts has its origin in the German economic data. The German Research Institute (DIW) estimates that the crisis has so far cost 212 billion euros to German GDP and that this cost will have increased to 400,000 million in summer, when the numbers of infections and hospitalizations finally stabilize thanks to the extension of the vaccine. Another calculation, in this case endorsed by the director of the Kiel Institute for World Economy, Gabriel Felbermayr, estimates a loss of 600,000 jobs in Germany, which will undoubtedly put downward pressure on demand in the tourism sector, although with consequences These consequences of the wave of insolvencies that Germany expects as the survival aid that the State is injecting into companies is withdrawn, lead TUI to make adjustments, which will not affect, on the other hand, to your cruise division.

The company will offer in 2021 most of its trips at the same prices as in 2020 and 2019, but the reservations made so far statistically show that tourists are betting on more expensive packages than in previous years. “Customers are now booking with higher quality. Many have extra leeway in their budget and choose a five-star hotel over a four-star hotel, ”says Joussen. One of the reasons is that the vouchers for trips canceled in 2020 are being redeemed and customers have an additional budget thanks to that. “All our market research shows that there is a huge desire on the part of people to be able to take pleasant trips after this difficult period and we are preparing for it.”he points out.

Joussen even claims that vaccines will make all travel restrictions unnecessary. «If we have protected the most vulnerable groups from infection, restrictions can fall drastically and in a generalized way for the summer, simply because they will no longer be proportionate measures, “he says.

The international travel business collapsed dramatically in 2020. TUI had to be bailed out by the German government, with an injection worth several billion euros. “Now the group’s 16 cruise ships will return to their routes and the most important destinations in the summer will be Spain, Greece, Turkey, Cyprus and Portugal,” he announces. Although he does not expect until 2022 for the tourism industry to recover to the level of the record year 2019, he is sure that “2021 will be a year of transition only due to the still weak first half of the year”, but it will experience a rebound in summer to levels already very close to normal. “Videoconferences can continue to replace some meetings, this is clear, but vacations can never be replaced nor can they take place remotely,” he jokes about the safe value on which the sector is founded.

From Spain, as a destination country, these same trends are perceived, according to the Expedia Group search tracking. In the last three months, the intention to travel in January has increased, especially in the direction of Canary Islands. Travel searches for January and February 2021 to the main most important destinations grow weekly, even despite the partial restrictions in force in many European countries and coinciding with the start of vaccination campaigns.

The support of the German State for TUI already reaches 4.3 billion euros. The third last rescue in less than a year includes a guarantee that releases 400 million euros in collateral, a 200 million credit line from KfW (equivalent to the ICO), the extension of an existing line until 2022, and 700 million in debt hybrid. The latter includes shares worth 420 million that can be converted into shares at a price of 1 euro, a huge discount of 80% on the market price. Any possible future participation in shares is limited to only 25%.

“TUI was in good health before the crisis. Around 1 billion operating profit, about 1 billion investments per year, 21 million customers in 2019 and an increase in 14% in bookings early 2020. Our business model was and is ready for the future. That is why optimism and confidence prevail ”, insists Joussen, adding:“ People want to travel and tourism will continue to be a growing sector in the long term ”.

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