TUI AG (LSE:TUI) buoyed the flight and travel sectors today with an upbeat fourth-quarter trade report as holidaymakers showed signs of returning to the market with increasing confidence.
The travel giant reiterated its expectation of returning to profitability this year despite third-quarter losses and increased flight disruption costs.
Encouragingly for TUI and others in the industry, average selling prices (ASP) compared to pre-pandemic with the summer 2022 ASP increasing by 18% versus summer 2019, a trend continuing into winter 2022/23 with higher ASPs has continued up 26% compared to 2019.
Bookings for summer 2022 are 91% of 2019 levels, with the UK, Germany and the Netherlands all above pre-pandemic levels.
CEO Fritz Joussen emphasized: “The trend is towards higher quality or longer vacations with a higher total vacation budget.”
“This is encouraging and shows the current importance of holidays and travel experiences in the post-corona era,” with the Canary Islands, Balearic Islands, Greece and Turkey remaining popular summer destinations for customers.
Winter 2022/23 bookings so far are showing signs of pre-pandemic levels, with the Canary Islands, Mexico, Egypt and Cape Verde forming an important part of the holiday offering.
“As in the summer, we continue to see a trend towards a higher share of short-term bookings for the winter and strong prices, confirming solid customer demand for holiday travel,” said TUI.
Although TUI failed to hold on to its early market gains, others in the industry did, including Wizz Air and IAG (owner of British Airways), both up 1%, defying the weaker market.
Victoria Scholar, Head of Investment, Interactive Investor, said: “Today’s update is a welcome development for investors … and with it, lifts stocks in the broader travel sector like IAG.”
TUI’s shares are down nearly 50% year-to-date as the broader market sell-off, rising cost inflation, labor shortages and general chaos for international travelers have unleashed a perfect storm for the company.
Challenges remain for the company and the industry, not the least of which is how much the ongoing credit crunch will affect voluntary spending on vacations and flights.
Still, today’s news is a rare beacon of positive news for a pandemic-stricken industry.
