TUI wants to attract Chinese, US holidaymakers as Europeans tighten budgets

By Joanna Plucinska

LONDON (Reuters) - TUI wants to attract holidaymakers from China and the United States to its new hotels in Asia and is offering cheaper destinations in eastern Europe as budget-conscious Europeans spend less and book shorter vacations, its top executive said.

The plan is part of an expansion already underway for the German group whose all-inclusive package holidays have for decades been popular with Germans and Britons seeking sun and sea in southern Europe, Turkey and Egypt.

Europe's largest tour operator has grown beyond its home turf in recent years with packages to more far-flung locations like Zanizibar, tapping a boom in high-end travel after the COVID-19 pandemic.

Now, it wants to lure Americans and Chinese travellers to hotels it is building in China and South East Asia, as well as to hot spots, such as Tenerife, CEO Sebastian Ebel told Reuters.

The group, which last year switched its listing from London to Frankfurt, plans to open 22 new hotels in China and South East Asia in the next three years, catering to Chinese travellers, who have avoided travelling to Europe since COVID.

"For us, it's important that we are in more and more markets, also to balance out risk overall," said Ebel.

Earlier this month, weak results and sluggish bookings data from TUI and its smaller UK rival Jet2 raised concerns about slowing European demand, knocking their shares. Inflation has hiked up costs in previously popular destinations, such as Turkey.

While demand has remained strong, tourists from key European markets, such as Britain and Germany, are spending less on their holidays and are booking shorter and more affordable stays, according to tourism associations and company data.

Traditional travel operators like TUI are also facing competition from relatively new entrants, such as airlines easyJet and IAG-owned BA which have launched package holiday businesses in recent years and from Airbnb and other home-share platforms.

"Value-for-money remains a key consideration for tourists, with implications for destination choices, length of stay and in-destination spend," the European Travel Commission (ETC) said in its annual report published last week. Last year, the average length of holiday fell compared with 2023.

The German and British economies underperformed last year as worries about high inflation worsen and companies struggle with high costs and competition from China.

The majority of TUI's 20 million customers globally come from Germany and central Europe, as well as the United Kingdom and Ireland.

SHIFTING TRAVEL

In recent years, TUI has also invested in marketing campaigns, improving its app and building or investing in new hotels outside of its traditional European destinations and offering holidays outside of the high summer season, the company has highlighted when presenting its earnings.

Britons in particular are shifting their travel dates to either side of the traditional peak summer travel months, data from British travel association ABTA shows, in an effort to find cheaper deals and avoid crowds.

TUI has also touted planned investments in the Polish market, citing affordable spa and hotel options, as well as growing spending power of the country's population of nearly 37 million. It has also launched plans for expansion into Czechia.

This week, it launched an "Experiences for Locals" programme in Britain and Germany, looking to lure people to pay for activities like cooking classes, painting workshops and walking tours at home.

TUI is also offering more "dynamic" packages which allow travellers to pick flights, hotels and car rentals separately and shop around for flights.

(Reporting by Joanna Plucinska; Editing by Josephine Mason and Tomasz Janowski)