Heatwaves and wildfires fail to dent holiday demand, says Tui

Travel company claims demand for trips to Mediterranean destinations has been temporarily dampened

Firefighters battle a blaze in Portugal. Officials said thousands of hectares were at risk across the country. AFP

Holiday company Tui has swung back to profit despite the summer heatwaves and associated wildfires in many European destinations this year.

The group said that the heatwaves affecting vast areas of the continent and the spread of the wildfires in several southern European countries have only “dampened, temporarily”, demand for trips to the Mediterranean.

Mediterranean destinations, including Italy, Spain and Greece have been hit by heatwaves and wildfires.

Greece, Italy, Algeria and Tunisia combined lost more than 1,350 square km to fires that affected 120,000 people in late July, according to EU estimates.

A forest fire is currently threatening the Algarve region of Portugal.

Tui cancelled holidays to parts of the Greek island of Rhodes until the middle of August.

The group said that there would be “costs for cancellations and lost business, customer compensation and repatriation flights” associated with those Rhodes holiday bookings, which are expected to be around €25 million (£21.5 million).

About 8,000 Tui customers had to be evacuated from their hotels on Rhodes island during the forest fire outbreak.

However, the company said 80 per cent of its guests travelling to Rhodes spend their holidays in the northern part of the island, which was not affected by the fires.

Tui said that it currently has 12.5 million summer customers so far this year and bookings are at 95 per cent of 2019 pre-pandemic levels.

The group posted underlying earnings before interest and tax of €169 million (£145 million) in the third quarter, up from a loss of €27 million (£23 million) for the same period last year.

Meanwhile, Tui said its third-quarter revenue was up by 20 per cent on a 6 per cent rise in summer bookings.

“Summer 2023 is going very well and demand for holidays remains high,” the travel company's chief executive, Sebastian Ebe, said.

“The Mediterranean remains the most sought-after destination for summer holidays.”

However, Mr Ebe said holiday-buying patterns could change due to the effects of climate change, and that will have a “significant impact” on the packages Tui sells.

The means the company could broaden its range of destinations to include those with more moderate temperatures, such as northern Europe.

In addition, Mr Ebe said the German company might introduce new insurance for travellers going to destinations at risk of climate change-related disruption.

Some observers point out that the high temperatures and threat of wildfires could deter some late-booking tourists this year.

“Record-setting temperatures in European countries such as Greece, Italy and Spain are not scheduled to ease up as we enter August, so it might be considered a much safer option to opt for a stay in northern Europe,” said Tim Hentschel, chief executive of digital booking platform HotelPlanner.

'Firing on all cylinders'

Overall, analysts said Tui's numbers show an impressive bounce-back in the summer holiday market, which was decimated by the Covid-19 pandemic and the various travel restrictions that were put in place as a result.

“Demand is looking brighter as travel rebounds, and flight capacity at the start of the important summer season has been firing on all cylinders,” said Aarin Chiekrie, an equity analyst at Hargreaves Lansdown.

“Tui doesn't just run flights; it has a much wider package holiday business.

“In some ways that makes it more defensive – there's more to offer and plenty of cross-selling opportunities.

“But the drains on cash when you have planes, huge hotels and even cruise ships to fill are enormous. So, returning to pre-pandemic levels is key and good progress is being made on this front.”