Alternatives help Tui beat off the cost of the crisis in North Africa

Published on Monday 9 May 2011 22:59

TUI Travel, Europe's biggest tour operator, said yesterday it was still on track to meet full-year profit expectations as increased demand for alternative destinations offset the impact of unrest in Egypt and Tunisia.

Tui's better-than-expected half year results came as fellow FTSE 100 firm Intercontinental Hotels said a return of business travellers helped it grow profits by a third in the first three months of 2011.

Tui managed to cut losses in the winter season, despite suffering from tough comparatives against an earlier Easter last year.

It said that disruption from troubles in Egypt and Tunisia cost it 29 million, 1m less than anticipated, and it expects to fully mitigate the impact on its key summer season by increasing the amount of holidays on sale to alternative destinations.

Chief executive Peter Long said: "We have reshaped our programmes across all source markets to satisfy the shift in demand to alternative destinations including Spain, Greece and Turkey."

Tui's underlying revenue in the six months to 31 March increased 5 per cent on the year before to 5.2 billion, thanks to improved efficiency and the turnaround strategy for underperforming parts of the businesses, especially its Canadian operation. Operating losses narrowed to 307m.

In the UK, summer bookings have been flat on 2010, but higher-margin tailored all-inclusive packages have seen 16 per cent volume growth as cash strapped families seek to avoid extra holiday expenditure.

In contrast, arch-rival Thomas Cook had said on Monday the impact of unrest in the Arab world had been worse than previously thought and had been compounded by tough trading conditions in Britain.

Tui is almost fully hedged against the higher fuel prices for the summer season, but said that if current prices are maintained, its fuel costs will be 30 per cent higher in 2012.

Meanwhile, InterContinental Hotels said business travellers returned to its hotels, especially in the key US market, boosting its revenue per room.

The world's biggest hotelier, which operates the Holiday Inn, Crowne Plaza and InterContinental brands, also unveiled stronger bookings and higher room rates for the rest of the year.

The company, which runs around 4,500 hotels, posted operating profits up 35 per cent at $112m (68m) for the first three months of 2011. Quarterly sales rose 9 percent to $396m.

Nigel Parson, an analyst at Evolution Securities, said: "It looks like outgoing chief executive Andy Cosslett has timed his exit to perfection with a top-of-the range Q1 to mark his swansong."

But he said the company's share price had "topped out".