TUI. A change of holiday plans.

Travel in general and TUI in particular are having a torrid time as a result of the Coronavirus pandemic. With a net loss of €763 million in the last 6 months TUI will soon cut around 8,000 jobs to reduce overhead costs by 30 percent.

Alongside cost savings the company needs to attract hesitant consumers back and Chief Executive Fritz Joussen has promised TUI will “reinvent the holiday” in 2021 with “new destinations, changed travel seasons, new local offerings, more digitalisation.”

Changes will include catering for more holiday makers choosing to take a car rather than fly. It is also likely to include more scope for customers to customise holidays online by adding TUI services.

The reality is that removing the barriers for booking a holiday will be key to TUI’s 2021 recovery. The company knows it must convince customers that the holidays they want will be first and foremost, safe.

Alongside enabling more people to travel by car TUI has announced other planned changes. These include passengers wearing masks, increased cleaning frequency, on-board testing, removal of self-service restaurants and more outdoor activities. The sensible aim is a much lower risk of infection with the smallest impact on experience.

This infographic was issued by TUI to explain changes – click on it to enlarge

These safety enhancing changes will be vital, but TUI will find itself facing intense competition for customers with tighter budgets and a greater focus on safety. Familiar ‘local’ hotels and holiday homes away from the most popular tourist destinations may look both safer and more affordable than TUI’s larger hotels or cruise ships for many consumers.

McKinsey’s recent report on China’s recovering points to younger consumers resuming travel first and economy hotels benefiting from tighter travel budgets. Click on the image (which is the report front cover) to read in full.

A further challenge for TUI will be momentum. Many consumers (and especially those older or with a family) will want to see the ‘social norm’ of a foreign holiday returning before they book their own trips. This will depend on the opening of destinations in future months and despite mounting losses, TUI will need to proceed with caution to avoid any further media coverage of holidaymakers quarantined.

It is difficult to escape the conclusion that Covid-19 will change our holiday habits significantly in 2021. With TUI highly dependent on foreign travel and owning its own hotels, resorts and cruise ships it will be a challenge to rapidly align with changes in consumer behaviour.

With a trusted brand and plenty of past customers TUI’s longer term prospects look sunnier. My 2021 forecast, however, remains cloudy as consumers seek safe, affordable and near, rather than holiday ‘reinvention.’

This article was highly informed by this excellent Bloomberg article:

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