Interview: The growth path of our hotel business

Original-Artikel auf deutsch via fvw.de.

Ahead of ITB Berlin , I gave an interview to the leading German travel industry news platform fvw | TravelTalk . I am more than happy to share the questions and my answers with my followers:

At the end of 2023, TUI had 424 resorts under its 12 own hotel brands. How much will the portfolio be expanded in the next three to five years?

The hotel sector is a strategic growth area for TUI . In the past financial year, we achieved a record result for this business segment with an adjusted EBIT of 549 million euros. We are investing in strong growth in line with our asset-right strategy. This means that we want to expand our hotel portfolio to around 600 hotels in the medium term. In 2023 (financial year), we were able to add 41 new hotels to our growth pipeline, which are now opening successively. This financial year, 11 hotels have already been realised through a combination of our own investments, investment partnerships and management and franchise agreements.

At a TUI hotel conference in Dubai in 2022, it was said that the TUI BLUE brand should grow from around 100 to more than 300 in the medium term. Is that still at the latest status? Is TUI BLUE the brand with the greatest growth opportunities?

Yes, our hotel portfolio will grow as a whole. That means across all 12 core brands. In order to sharpen the brand profile of TUI BLUE as a global brand in the 4-5 star segment, we have strategically expanded our brand portfolio in the upscale segment with ‘The Mora’ and in the more affordable segment with ‘TUI Suneo’. All our brands will continue to grow strongly.

Two years ago, you launched a hotel fund with a target volume of 500 million euros with the capital management company Hansainvest. The first property of the new luxury brand ‘The Mora’ in Zanzibar is now the first purchase made. How much capital does the fund now have and what are the next projects?

The fund is operational and has already acquired two hotels. The 5-star hotel The Mora in Zanzibar and the Robinson Club in Cape Verde. Both hotels are managed on a long-term basis by TUI and Robinson respectively. Further hotel acquisitions are currently being examined. Both transactions were initially financed with equity. In addition, the fund has further equity that has not yet been invested, which is to be supplemented by debt capital for further hotel acquisitions. The capitalisation and yield development of the fund is proceeding according to plan, and overall, we are very satisfied with this form of investment partnership.

Out of the 360 self-operated hotels, 53 per cent are managed, 38 per cent are owned – leasing and franchise hardly play a role. What will the mix look like in future?

As part of our asset-right strategy, we will grow across all forms of contract and financing. More important than overall quota planning is finding the right constellation for the specific individual project. We are therefore focussing our decisions less on a top-down and more on a bottom-up approach. Nevertheless, we naturally have an overall plan in which regional growth focuses and cluster formation play a much greater role than the pure financing mix.

Your own brands are strongly represented in Spain and the Caribbean, thanks to Riu and Blue Diamond, as well as in Greece and Turkey. Recently, we also added some facilities in Asia. In which countries do you see the greatest potential for growth?

With more than 400 hotels, we now have a global and well-diversified hotel portfolio. Strategically, our growth initiatives are focussed on further consolidating our existing portfolio on the one hand and developing new tourist destinations on the other. Thanks to our vertical integration, we are predestined for this and want to expand this strategic advantage even further. In other words, we not only bring new hotel offers to a target destination, but also demand and customers through our own strong sales platform. Examples of our success include the development of our destination clusters in Cape Verde and Zanzibar.

Most of your hotels are in the four- and five-star segment. The budget brand TUI Suneo was recently expanded in response to increased travel costs and the cost consciousness of families. What is your strategy in this area?

As a specialist for holiday hotels, we want to serve all customer segments with a differentiated brand portfolio. In contrast to our TUI BLUE brand, with TUI Suneo we have now created a further offering in the price-conscious segment. By the way, we are not only targeting families with this brand; some of our hotels are also being operated as adults-only hotels for the first time.

Self-catering apartment complexes are very popular in source markets such as the UK and Scandinavia. DER Touristik is even offering mobile homes on campsites for the first time under the Sentido brand. Are these also options for you or is it more a case of classic resorts and clubs?

In some source markets, customers do indeed have special expectations of our hotel products. We also cater to these special customer requirements by customising our product lines. In general, however, there is a strong trend towards internationalisation, i.e. more and more guests from different destinations are staying in the same hotels. A good international concept is becoming more and more popular.

Many holiday hotels in the best locations have been standing for several decades. Riu, for example, has completely renovated many resorts in recent years. How much does TUI invest in keeping the resorts up to date?

We have a high proportion of regular guests in our hotels. Both the offer and service ("software") as well as the hotel premises themselves ("hardware") are crucial for the best customer experience. Feedback from our guests shows a very high level of satisfaction with our differentiated hotel brands and concepts. At the same time, we are focusing on maintaining and modernising our hotel facilities.

Travel trends, design and customer wishes are changing, as are some traditional family structures. How do you respond to this and what criteria do you base new facilities on?

The individual design of holidays and special experiences are becoming increasingly important. We offer a wide range of inspiration for personalising your hotel stay, both digitally via our hotel apps and with our employees. Offers such as select your room are also popular with travellers. For families, we offer childcare and entertainment options that go beyond the traditional structures so that young and old can enjoy their holiday. Our club brands Robinson and TUI Magic Life in particular offer the best conditions here thanks to their communicative concept. The latest example is The Mora. For the upmarket segment, we offer a particularly flexible service that provides a high degree of culinary freedom and customised, high-quality experiences.?

Many of your resorts can only be booked with TUI tour operators, but not all of them. How important is exclusivity to you and how does this change in terms of long-haul hotels that are also booked by other source markets (e.g. Asia)?

The high occupancy rates of our hotels, in particular Riu and Robinson, are also characterised by the high brand loyalty of our guests. As part of our growth strategy, we are also opening hotels in new destinations that are not only popular with our Northern European TUI tour operator customers. Accordingly, these hotels can also be booked in other source markets in which TUI is not represented as an operator. From a Hotels & Resorts perspective, the scope is therefore much more global. Nevertheless, the hotel sector naturally benefits from the strong distribution strength of our TUI tour operators in Europe. This is a very significant advantage of our vertical integration as TUI Group.

Hotels & Resorts got off to a good start in the new financial year with slightly higher occupancy and higher bed rates. In FY 2022/23, occupancy stood at 82% and revenue per bed at 87 euros. What do you expect for the rest of the year?

Our hotel business has recovered very quickly from the effects of the Covid-19 crisis. We were already able to post another record result for the hotel sector in the last financial year. This strong trend is continuing in this financial year. Occupancy and room rates are above our expectations.

A personal thanks to fvw | TravelTalk and Klaus Hildebrandt for the interview.