Today is as good a time as any to tell a tourism business fairytale that rose up out of a worldwide pandemic, which refuses to go away. Let’s start the story unconventionally, by revealing part of the ending, first. Tour giant TUI’s net debt has ballooned to 7.2 billion euros during this pandemic, and the company must start repayments in 2022.
Today, I read a story at Greek Reporter entitled “Travel Giant Says Greek Vacations Could Resume in April“, which is the latest dreamy forecast from the German company. I use these terms because TUI has only recently announced an 88% drop in profits from €3.85 billion to €468.1 million in the last three months of last year, on top of the billions now owed debtors. Yahoo! Finance calls the latest news, “TUI banking on vaccinated Brits”.
The problem for TUI and all concerned is, the dreamily positive outlooks for the coming months have no basis in reality. I took the liberty of contacting at random several general managers at resorts we’re familiar with, and advanced bookings are about what you’d expect in these uncertain times. Few international travelers have an idea what their vacation plans will be, if they even have the resources, let alone the freedom to travel.
TUI can dream on, but this seemingly endless pandemic keeps hanging on. And, the longer lockdowns stay in place, the less likely it will be that potential travelers even have the resources to go on vacation. This is something none of the ‘experts’ are talking about. Their ideas of travel demand seem to equal the logical urge of people to take measures against cabin fever. Germans cannot usually wait to escape cloudy skies, but escaping costs euros and time off, commodities most systems are depleted of. Take note, experts say the UK economy will not recover for two years, and Germany is only in slightly better shape.
TUI, and every other travel business in the world, seems to be relying on the COVID-19 vaccines to fix it all. Ultimately, these preventative vaccines will surely stop the lockdowns and travel bans, but not before more potential travelers are left out of work or far behind in their bills. Fewer people are going to be romping about searching for sea, sand, and sun wonders, and a lot more people will be putting up beach umbrellas in their backyards this season. Conversely, CEO Fritz Joussen is telling everybody there’s a “huge pent-up demand” that’s going to take effect soon. As if travel urges were like a dependency on opium.
One thing we all agree on, is that 2021 will be the most competitive tourism season ever. And many businesses will just not be able to stay afloat. TUI, and other giant companies, have relied on tiny margins to pad their balance sheets. The hotels that depend on these big companies have been forced to become the grocery stores of travel experience too, so the question of “margins” is going to cause many bankruptcies this year. Hotel A versus Hotel B in the battle for scarce clients, this is what 2021 is all about.
TUI is propped up by governments and billionaires unable to simply let the company go the way of the Dodo. But desperation and certain lending cannot do a thing for the tens of thousands of UK or German tourist who will stay home this year. That is, unless TUI can figure out how to get a margin on a backyard beach blanket and a bucket of sand.
To be continued…