Tourism Giants Get Prepared for Profitable Summer time Season
In countries such as the UK and the US, the successful vaccination campaigns are creating a desire to travel. Tourism giants like TUI expect good summer business.
It should start at the end of May. Holiday planes operated by Lufthansa subsidiary Eurowings will then fly British holidaymakers from Birmingham and Manchester to Mallorca twice a week. Extensions to the flight plan will be analyzed over the next few weeks. For the first time, Eurowings holiday planes are taking off from Great Britain for the island, which is also popular with many Germans.
This enables the early arrival of the British The UK is making much faster progress with corona vaccinations than the EU. By mid-March, the UK was giving over 40 doses of vaccine per 100 population. In the EU, the average is below 10.
The British are gripped by the travel bug
When British Prime Minister Boris Johnson announced on May 17 that vacation flights would be approved, provided that the spread of the pandemic and possible mutations of the virus were kept under control, the British were immediately caught in the travel bug. With low-cost airlines such as Easyjet, Ryanair and Eurowings, bookings rose from their very low level with high three-digit percentage growth rates.
The British subsidiary of the TUI Group also recorded an increase of 500 percent. Should the British government manage to keep the pandemic under control with the vaccination campaign that has so far been successful, the upturn in the travel business will certainly make itself felt in the tourism group’s balance sheet.
With around six million customers in 2019, the UK is TUI’s second largest market after Germany with seven and ahead of France with five million travelers. The British TUI CEO Andrew Flintham would therefore like to work with the government on joint solutions so that British holidaymakers can travel.
Germany TUI boss Marek Andryszak expects “short-term bookings for the Easter holidays”. Because the decisive factor is not the politicians’ warnings about traveling, but the risk classification of the Robert Koch Institute. This sticks to the incidence value – and on Mallorca this has been well below the risk zone threshold of 50 for a long time, with a downward trend. From March 27, before Easter, TUI would like to fly from Düsseldorf, Frankfurt and Hanover to the Balearic Islands and agree on offers for hotel stays. In the summer, TUI jets depart daily from seven German airports for Mallorca.
TUI expects good summer business
Should the travel warning and thus the quarantine requirement be lifted up to ten days after returning home, Marek Andryszak, TUI boss in Germany, expects an increase in bookings, similar to that in Great Britain. In a few weeks, the manager is hoping for a quarantine-free trip to the Canary Islands, Greece and Turkey. “In July and August we will be operating at very high capacity in the Mediterranean,” Andryszak believes.
The analysts at Bloomberg Intelligence currently estimate TUI’s monthly outflows from reserves at 250 to 300 million euros. The liquidity of 2.1 billion euros at the end of February gives the group a few more months of leeway.
In the equity markets, the new confidence in the industry has significantly increased the stakes held by tour operators, airlines, airport operators and cruise lines. Shares in US media giant Walt Disney also rose after it became known that Disneyland, California, could open in April under strict conditions. The vaccinations in the USA are in full swing and so far very successful.
The global travel industry has to deal with the biggest slump in its history. According to the World Tourism Organization (UNWTO), 74 percent fewer people traveled from January to the end of October 2020 than in 2019, after 1.5 billion before Corona, almost a fifth of the world’s population. The world association estimates the financial damage at 1.3 trillion US dollars. In Spain, the second most popular travel destination in the world, gross domestic product (GDP) shrank by 11 percent last year. In an average year, tourism accounts for 13 percent of Spain’s GDP. The global decline in tourist numbers was similar in all regions in 2020.
For the year 2021, experts expect the majority of travelers to book holidays at home or in the neighboring countries. This is particularly helpful for online platforms such as Expedia and Booking. Many US citizens are also likely to vacation in their own country or in neighboring Canada this year. Like last year, this should help Airbnb’s rental agencies do better business. During the crisis, the financial burdens for online providers are much lower than for traditional tourism groups such as TUI with their own hotels and cruise ships. Experts do not expect a return to normality in tourism until 2023.
The vaccination certificate should help
However, evidence of corona vaccinations could speed recovery. According to a survey by the online portal Cruise Critic, 40 percent of those surveyed would book a cruise as early as 2021. However, more than 80 percent of those surveyed would only board a ship if proof of a corona vaccination were mandatory. In the US, the evidence with the two big providers Royal Caribbean and Carnival could be rolled out earlier than in other regions.
The EU wants to introduce voluntary digital proof of corona vaccinations by the summer. It should then also be possible to transfer the data to apps on cell phones.
Tourism giants are now using the good mood of investors to raise capital. New shares raised $ 1 billion for the Miami-based cruise company Carnival. The low-cost airline Easyjet has borrowed 1.2 billion euros.
The competitor Ryanair has cash reserves of around 4.5 billion euros and, according to calculations by analysts at Bloomberg Intelligence, can cover its fixed costs for almost two years. At the end of March, at the end of the financial year, the company will have reserves of at least three billion euros. 80 percent of the fleet is financially unencumbered, which is low compared to the industry.
As a result, Europe’s largest low-cost airline is starting over as holiday flights in Europe recover. Analysts expect a net profit of more than 300 million euros for the new financial year and 1.6 billion euros a year later.
