Anyone leading a business in the travel sector needs to be an optimist to motivate staff and encourage customers that they should still book holidays. That’s certainly the case with TUI which is remarkably upbeat given the circumstances. It talks about people enjoying their holidays and the company being in a strong position to prosper once travel volumes start to recover.
AJ Bell’s Russ Mould said: “Despite this optimism, TUI has seen a decline in booking volumes, holiday prices, holiday capacity and a shift in consumer trends whereby many people are waiting until the last minute to book which clouds earnings visibility.
“The fact that governments keep changing travel advice is not helping matters, but the pandemic is a fluid situation and companies like TUI will simply need to keep on their toes and be ready to either seize opportunities to sell more holidays if conditions permit, or hunker down and go into survival mode if conditions worsen.
“Summer 2021 bookings are a mixture of pent-up demand to get some sun and people shifting their 2020 bookings back a year. If the UK were to experience another national lockdown then TUI could feasibly see a dramatic reduction in summer 2021 bookings but potentially a surge once lockdown conditions ease.
“There is pressure on cash management in the business with TUI having to balance outgoings such as running costs and customer refunds with money coming in from new bookings. The current rise in coronavirus cases in the UK and many parts of Europe would suggest net cash outflow is going to increase.
“The sun was shining on TUI and its travel peers in recent months as lockdown conditions eased, but now the clouds are gathering, and its party looks like it will be rained off.”
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