The news that Tui Travel has recorded record profits during 2011 will make uncomfortable reading for executives of rival Thomas Cook whose current difficulties have kept the company in the headlines over recent weeks. The announcement from Tui Travel, which has over 200 brands including high street commercial properties First Choice and Thomson, is seen as vindicating the company’s focus on specialist travel which has protected it from the fall in mainstream holiday bookings.
The figures released by Tui Travel show that the company recorded a pre-tax profit of £144 million in the twelve months up to September 30. This is in sharp contrast to the £73 million loss the company reported last year. In addition the company’s operating profit – the figure excluding expenses such as acquisition costs – rose 18% to a total of £471 million with record profits being recorded in the UK market. Tui also reported a significant rise in online sales.
A rise in demand for holidays in destinations such as Northern Europe and Canada are credited as having contributed to these favourable results as Tui’s concentration on niche tour markets continues to pay dividends. The Financial Times reports that analysts consider this aspect of the company’s strategy, which results in higher margins, as being the crucial difference between the performance of Tui Travel and Thomas Cook. Thomas Cook recently announced the closure of a number of its commercial properties and an increase in its already substantial debt burden.
Giving his response to the record profits chief executive Peter Long said: “We are very pleased with our robust performance in 2011 and have delivered another year of profit growth against a backdrop of unrest in key North African destinations and weak consumer sentiment in some source markets.”
In what many may see as another jibe against Thomas Cook – which last week made an official complaint about an advertisement run by First Choice and Thomson alluding to the troubled company’s financial problems, – Mr Long also said: “Being a traditional tour operator won’t make you a success in this market.” Tui Travel has defended the advertisement saying it was intended to reassure its own customers that the company was not facing similar problems.
This week’s profit announcement is a further boost to the Crawley based company which is now the world’s largest tour operator. It serves 30 million customers in over 180 countries and employs over 49,000 people throughout its offices, hotels and other commercial properties.
While Thomas Cook’s share price has fallen by over 90% during the past twelve months the markets have responded positively to Tui Travel’s news. In early trading the company’s share price immediately rose by 3.6% to reach 175.7p and while there has been a slight fall since it appears to be holding up well. The news will be welcomed by the travel industry which has experienced a difficult period generally and will be hoping for a better 2012.
Tui Travel in particular can look forward with confidence to the New Year and as Peter Long himself has said: “If Thomas Cook loses volume we are the natural beneficiary.”
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