TUI continues to deliver for holidaymakers and investors alike as it looks set to hit its recently upgraded full-year profit guidance.
TUI operates a diverse travel business, owning an airline, cruise ships, hotels, and resorts, serving over 20 million customers across more than 180 destinations. Its lower-margin airline business captures guests and funnels them into its other, more profitable divisions, driving its ability to offer unique packages with strong pricing power.
Despite broader economic pressures, TUI’s Cruise segment continues to navigate the choppy waters well. The addition of the new Mein Schiff Relax ship in March 2025, alongside fewer dry dock days for Hapag-Lloyd Cruises, increased capacity by 13% over the second half of the year. In a clear sign that most consumers have been prioritising travel, TUI’s been able to raise prices slightly while still filling more cruise cabins.
It’s not been all smooth sailing though. Weakness in its key market of Germany, a European summer heatwave and troubles in the Middle East have all weighed on demand over the peak summer season. While the latter seems likely to continue, at least in the near term, Germany is showing some early signs of improvement, with winter bookings back in positive territory. A much-improved balance sheet should fuel the group’s ability to flex its muscles and expand capacity. As long as macroeconomic conditions don’t deteriorate, TUI’s medium-term guidance to grow underlying operating profits by 7-10% per year looks achievable.
By Aarin Chiekrie, equity analyst, Hargreaves Lansdown. The author holds shares in TUI.
