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Short of Cash: TUI Solvency Threatens Hundreds of Greek Businesses

TUI ADR historically until the close on Friday

News that Greek hoteliers are over a barrel because TUI AG has not yet to pay millions of euros to certain hotels, comes as little surprise. Financial analysts say the German group has burned up €3 billion in the last 8 months. Now, all those hoteliers with their eggs in one basket stand to be cracked by Europe’s biggest tour operator.

An 80% or more drop in arrivals to Greece in the wake of COVID-19 spelled disaster for many Greek hoteliers, and now even their “savior” – the German giant that promised to send 2 million even with a pandemic – is a hammer blow.

A Kathimerini story cites hoteliers saying TUI’s delay in paying “poses a threat to the sustainability of a significant number of hotel enterprises”. Back in Summer, TUI unilaterally changed its contracts with hotels over the timing of payments, and now the German tour conglomerate proposes paying only 25% of its outstanding debts by the end of 2020 and the rest before the start of the 2021 season. TUI solvency is the fear of every hotel owner who has a contract with the company.

The Thomas Cook crash was a big factor in Greek hoteliers losing in excess of €200 million last year. Now hospitality businesses fear that TUI may go under as well, leaving them holding an empty bag for paying their debts. TUI is seeking more money from the German government, selling off assets, and looking for the world like a company about to go bankrupt.

Hundreds of Greek hotels, and the businesses and livelihoods they support, are now at risk because TUI refuses to pay them most of what’s owed until late March. The Financial Times reports correctly:

“The payments, usually made 60 days after departure dates, amount to several hundred thousand euros for many hotels — funds that are crucial to see them through the quiet winter season.”

Already, some operators are considering ending their contracts with Europe’s biggest tour operator. The FT article features a quote from Nektarios Santorinios, an MP from Rhodes, saying this news is a “bombshell” for many hoteliers:

“They took a big risk opening this year given the pandemic and many have racked up losses. It’ll be a struggle to survive for many three- and four-star operations.”

Meanwhile, Tourism Minister Haris Theocharis is saying he’s “monitoring the situation closely”, which he should be since he’s the one who hammered out special partnerships with Greece and TUI in order to redo tourism in 2020. We’ve been reporting on Theoharis’ efforts to send tourists to Greece no matter what for some time now. Amazingly, or alarmingly depending on your perspective, Greece’s tourism ministry seems oblivious to the real situation.

TUI’s largest shareholder, Russian billionaire Alexey Mordashov, who owns 25% of the London-listed company, is rumored to be ready to participate pro rata in a potential capital increase to rescue TUI solvency. The Anglo-German company is also looking at selling shares in the same way Lufthansa sold shares to Germany in its €9 billion euro bailout earlier this year. But German lenders have bigger issues facing them now.

TUI has deals with over 2,000 hotels in Greece. The company is looking to snare €1.8 to €2 billion more from Angela Merkel’s government, to go along with the €2 billion the company already has on its books. According to Barclays, TUI is burning through cash like there is no tomorrow (€3 billion in eight months).

Unfortunately, no tomorrow for TUI means the end game for hundreds of Greek businesses.

Categories: Featured
Phil Butler: Phil is a prolific technology, travel, and news journalist and editor. A former public relations executive, he is an analyst and contributor to key hospitality and travel media, as well as a geopolitical expert for more than a dozen international media outlets.
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