It is at ITB (Internationale Tourismus Börse) in Berlin every year that the tour and travel industry gets together to conduct business and, almost as important, exchange face-to-face gossip and intelligence with others as to just what the outlook for the remainder of the year is, as well as what prices and product for the next year (in this case, 2020) might be. This year, delegates to ITB, which runs from March 6 to March 10, have been besieged by multiple reports of just how bad things are for TUI, which is the number one tour operator in all of Europe and, of course, the market leader in Germany. Number two in Germany is Thomas Cook, which is number one in the UK (where TUI is number two).
What triggered wave of bad news revolving about the two operators, according to most accounts, were the following:
—There was a long and particularly brutal heat wave that struck in mid-summer then returned at the end of the summer, with daytime highs will likely be as high as 30°C (86° Fahrenheit) as far north as northern Germany. Parts of France, Italy and parts of central Europe climbed well above the 30°C mark.
—Soccer’s 2018 World Cup, which took place in Russia from 14 June 14 to July 15 in Russia, meant that many Europeans held off traveling until after the event. And some decided to forego long-haul travel in favor of holidays in country or within the Eurozone.
—Holidaymakers from the UK traveled to the continent less than expected, due in part to the nervousness over the effects of Brexit on the British economy; the British pound was trading at 120 euros in April 2017, dropped to 109 in August 17 and has stayed at or below 115 since then.
The causes notwithstanding, the cumulative impact was enough for Thomas Cook to issue two profit warnings as the 2017-18 financial year came to a close at the end of September. Shares in the company fell to their lowest price level since 2012 and no dividend was issue.
Thomas Cook—the after effect: As of this week, according to Reuters, Thomas Cook has recruited Credit Suisse, Morgan Stanley and Bank of America Merrill Lynch to explore the possible sale of its airline business, a source familiar with the situation said. Thomas Cook indicated last month that it was prepared to sell its profitable airline business—the airline and its partners fly to more than 100 U.S. destinations—to finance what it hopes will be a comeback from the losses racked up in 2018.
TUI—the after effect: During a call-in to discuss the company’s performance in the first quarter of the 2018-19 finance year, the company’s chief executive, Fritz Joussen, announced that it had experienced doubling in seasonal losses to 83.6 million euros ($94,4 million). Shares in TUI fell by almost a third. In a dramatic move apparently aimed at bolstering confidence in the business, company, invested some 1 million euros ($1.13 million) of his own funds in the company.
The industry will have a better feel for the outlook for 2019 and 2020 once ITB gets underway. Somewhere, midst the 180,000 total attendees, including 10,000 exhibitors from all over the world, is an answer.
