This year has not proven to be the most profitable for travel agencies in the UK, largely thanks to the Olympics drawing crowds into the country as opposed to encouraging Brits to take a foreign holiday. With thousands of visitors pouring into Heathrow Airport on a daily basis, many British people have been put off the idea of travelling this summer due to concerns about queues at immigration upon their return.
However, TUI Travel Plc have been able to post encouraging third quarter results up to June 30th, with profits, while not as high as last year’s, nonetheless remaining competitive in a challenging market.
The underlying profit for the Group works out at £74 million, as compared to last year’s posted £88 million profit at this time. However, factors such as the timing of the Easter school holidays could easily have contributed to this – as the date upon which Easter falls changes year upon year, people’s holiday plans vary accordingly. The unseasonable burst of excellent weather experienced by many in the UK earlier in the year coincided with the school holidays, meaning many families may have chosen a budget break in the UK as opposed to chasing the European sunshine.
Perhaps this is why summer 2012 is looking so promising this year – currently, TUI Travel agents have less left to sell than at this time last year, indicating that profits in the fourth quarter could make up for a slight dip in revenue in the third. Whilst revenue has only dipped by 2 per cent this year, totalling £3,690 million compared to last year’s £3,774 million for the third quarter. The losses in profit are due to marketing techniques such as sales and promotions, along with higher operating costs for airline companies, has meant the Group has some catching up to do in order to remain level with last year’s results.
In the third quarter of 2011, the underlying profit before tax posted by TUI Travel was £60 million, yet today this dropped to £45 million for Q3 2012 – a drop of 25 per cent. While this is in no way unusual for commercial property travel agents in the current economic climate, dips of such magnitude could be a cause for concern if continued into the fourth quarter.
Additionally, the reported profit before tax has similarly taken a hit, falling from £11 million in Q3 2011 to only £3 million in the months leading up to the 30th June 2012. This is a drop of almost 75 per cent.
This could all change in the fourth quarter, however, with summer 2012 bookings up by 9 per cent. Combined with the fact that trading is improving for Winter holidays this year, and sales have increased 17 per cent when compared to last year, chief executive of TUI Travel Peter Long remains optimistic about closing upon a successful year by the end of the fourth quarter.
He says; “We are pleased with our performance, driven by our strategy of differentiated and exclusive product with a focus on online distribution. We are significantly outperforming the market in the UK.
“Summer 2012 volumes have improved in most key markets since our last update. We are seeing strong demand and late margins for the peak Summer period. Our Winter 2012/2013 programme has had an encouraging start.
“We are confident of exceeding our full year expectations based on like for like exchange rates, however the impact of retranslation of fourth quarter Eurozone profits at current exchange rates leads us to believe we will perform in line with our expectations for the full year.”
