TUI continues cost-saving program, looks to summer recovery

European package travel specialist TUI Group is hopeful of a return to some form of normality for summer 2021, with 2.8 million customers already booked.

The figure represents a 44% decrease on Summer 2019 bookings but the company says daily bookings in January were up 70% compared with December 2020 and that the peak booking period is still to come.

In its first quarter 2021 results, TUI confirmed its third financial package of €1.8 billion, which will help it “bridge liquidity” to the summer.

The company says that as of February 3, it has cash and other facilities of just over €2 billion.

Revenue for the quarter was down 88% to €468 million, with hotels making a loss of €96 million, cruises making a loss of €98 million and TUI Musement, its tours and experiences business, making a loss of €33 million.

Tour operating and airlines meanwhile made a loss of €446 million.

Overall, TUI made an EBIT loss of €699 million and total loss of €813 million, compared to a profit of €190 million for the first quarter of 2020.

TUI says its “global realignment program” is on track and will bring in annual cost savings of €400 million by full-year 2023.

Group CEO Fritz Joussen says more than half of the program is already executed and that it expects this year’s savings will be about €250 million.

The first measures of the program kicked off last August. with a 30% cost reduction target and a plan to cut 8,000 jobs, of which 5,000 have already been cut.

TUI Musement has seen a 25% reduction in full-time employees as the group continues to drive digitalization of tours and activities more widely.

Online distribution for Musement was 47% for the quarter compared with 16% for the same quarter in 2020.

From a digital standpoint, the company has rolled out various features on the Musement app in recent months, such as geo-location and dynamic merchandizing, with plans to add booking and management as well as ratings and reviews. The main TUI app meanwhile will be updated to include hotel check-in and live flight times.

Commenting on distribution trends, Sebastian Ebel, chief financial officer, TUI, says that, with shops closed, all markets have seen a strong increase in direct online distribution:

“An effect which we expect to stay also post crisis to a certain extent. The share of non-paid traffic also increased significantly, which led us to believe that the cost of distribution in future could be significantly lower.”

TUI is not giving guidance for the year but Joussen says “everything indicates tourism will be coming back soon.”

The company says it assumes operations and bookings will begin to normalize around Q3 2021.

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