TUI Travel hosts a presentation to investors and analysts to update on its strategy. To coincide with this event, TUI Travel is issuing a trading update.
* Underlying operating result improved by over £20m in the first quarter of the financial year;
* Result driven by continued turnaround progress, particularly in Canada, and improved trading;
* Encouraging trading trends have continued for Summer 2011:
-Overall bookings up between 8 – 16% in key markets;
-Strong customer demand for differentiated product, for which bookings are up 26%, 46% and 21% in the UK, Nordics and Germany respectively;
-Remain cautious given the uncertain economic and geopolitical environment.
* Clear plan to deliver the previously announced £89m turnaround opportunity by 2013, and this is underpinned by £60m of cost savings;
* Further cost savings identified in the UK business and central functions.
Peter Long, Chief Executive of TUI Travel commented:
“In the three years since the formation of TUI Travel, we have achieved a number of key successes against a challenging background of economic uncertainty and substantial volatility of foreign exchange and fuel rates.
We have made good progress at delivering the turnaround of our underperforming businesses and have clear plans in place to deliver the remaining turnaround in the coming three years. With two-thirds of the £89m opportunity underpinned by cost initiatives I am increasingly confident that we will achieve our target. In addition to the cost actions, the remaining turnaround opportunity is driven by our product and distribution strategies.
Our outperformance in key source markets shows that our strategy of developing differentiated holiday concepts is working. These healthy trading trends are a direct result of many years of product investment which improves customer satisfaction, loyalty, booking profiles and ultimately margins. We are accelerating the roll out of differentiated products across all source markets to drive the shift in mix away from commodity products, which will continue to experience margin pressure.
There is a clear trend for our customers to book their holidays online. We currently have a leading online presence and plan to expand this highly efficient channel to drive greater control of distribution, and reduce costs, in our Mainstream businesses. Additionally, we are investing in our accommodation only OTA businesses, particularly in Asia where we are utilising the LateRooms.com infrastructure and content to build our presence in this attractive market through our AsiaRooms.com brand.
We are also investing in technology to ensure we maximise the efficiency of our operations and we offer the best customer experience when booking, amending or paying for a holiday. Replacement of core systems in the major source markets of UK, Germany and France facilitates increased levels of automation which will improve customer self-service options and simplify our back office processes.
I continue to believe that TUI Travel has excellent potential to deliver substantial growth and look forward to the next three years of our journey. Whilst the economic environment remains uncertain, the progress in the first quarter and our forward bookings represent an encouraging start to 2011.”