TUI Group on track for higher profit growth, signs Oman hotel alliance

TUI Group reaffirmed its fiscal 2025 underlying EBIT growth guidance to 9-11%, an increase from the previous 7-10% projection, citing strong demand across its Hotels & Resorts, Cruises, and Markets + Airline segments. Despite a 2% dip in summer 2025 booking volumes, average selling prices rose by 3%, contributing to expected revenue growth at the lower end of 5-10%. The company also announced a strategic alliance with Oman’s OMRAN Group to develop five new hotels, with OMRAN acquiring a 1.4% stake in TUI, underscoring its expansion strategy and positive outlook.

Analysis

TUI Group has upgraded its fiscal 2025 guidance, now projecting underlying EBIT growth of 9-11% versus a prior 7-10%, signaling strong confidence in its operational outlook. This optimism is underpinned by robust consumer demand and pricing power across its segments. While total summer 2025 bookings are down 2% year-over-year, this is more than offset by a 3% increase in average selling prices, indicating TUI's ability to protect margins. The Hotels & Resorts division reported a 7% increase in average daily rates in the fourth quarter, while the Cruise segment is expanding capacity with a 14% increase in available passenger cruise days and a 7 percentage point rise in occupancy for H1 FY26. A notable point of weakness is a 5% decline in summer bookings from the German market. Mitigating operational risks, the company is substantially hedged against currency and fuel price fluctuations for the summer season, with jet fuel 100% hedged. Furthermore, the new strategic alliance with Oman’s OMRAN Group for five hotels, structured as a capital-light joint venture where OMRAN will acquire a 1.4% stake in TUI, points to a clear path for long-term, low-risk expansion.

Key Decisions for Investors

• Given the upward revision of EBIT growth guidance and demonstrated pricing power, investors could view the current operational momentum as a positive signal for TUI's profitability.
• The capital-light joint venture in Oman, which includes an equity investment from a strategic partner, represents a long-term growth catalyst and should be factored into valuation models.
• Investors should monitor future booking volume trends, particularly in the German market which showed a 5% decline for summer, as sustained volume weakness could eventually challenge the company's ability to maintain high pricing.
• The robust hedging program de-risks near-term financial performance from fuel and currency volatility, but it is crucial to monitor the hedging strategy for subsequent seasons as this protection is not permanent.