As the new year begins many people will be thinking of getting away for some holiday sun or snow, and for the particularly organised, perhaps booking their holidays for the year ahead. That is why I like Tui as a tour operator given its increasingly diversified operations around the world which offer a broad range of appeal.
As someone who likes doubling, I have to admit my eyes were recently drawn to Tui’s announced plans to double their number of hotels in Asia over the next three years. Having already opened hotels under the Tui Blue mass market brand in Vietnam, Malaysia and China and its new upmarket brand The Mora in Zanzibar so far, Tui is positioning itself for growth in not only additional popular global destinations, but also new market segments.
Tui’s latest hotel developments span a wide range of locations, in countries with growing middle income consumers and vast potential; with nine hotels set to open in China; three in Thailand; two each in Indonesia, Cambodia, Vietnam, and the Maldives; and one in the Philippines. Given Tui’s €23 billion of revenue in the financial year 2024 was derived largely from customers from or near Europe, this global expansion offers an insight into the growth potential of Tui in the coming years.
Since the pandemic Tui has also been putting its house in order through the reduction of debt, and in its most recent accounts reduced the figure by €0.5 billion to €1.6 billion. This compares favourably to the €6.8 billion of debt held only a few years ago in 2021. Tui’s net leverage ratio (a reflection of its debt position) also continued to improve to 0.8 in 2024, down from 1.6 in 2019.
So you can see why S&P and Moody’s have a positive outlook on Tui and have been gradually improving their ratings for the business recently. With the final pandemic KfW debt due to be paid off in 2025, it appears to me that Tui are well on the way to their pre-pandemic ratings of BB/Ba (S&P/Moody’s) and perhaps in time may even secure coveted investment grade ratings.
Tui’s commitment to improving its top line revenue and bottom line profit through expansion and innovation give me confidence in its business in the coming years. As a business it it generating significant free cash flow and that is always something I appreciate. With international expansion and cruise operations gaining momentum, not only will Tui be more resilient but hopefully more profitable, which may well allow them to reinstate dividends in the near future. I am hoping for an announcement on that in the end of year results announced in December 2025.
All things going well I hope to see a share price towards the end of this year of €13 and then rising to over €18 in 2026. If achieved this would represent a growth of over 56% in 2025 and 116% by 2026. It should be noted that the average analyst rating is over €10 a share, so I am more optimistic than most. However given the 93% increase in share price of IAG in 2024 following repayment of all pandemic-era debt, debt rating improvements, sales growth as well as dividend reinstatement I hope €13 may even be on the conservative side.
Could we perhaps see a doubling of the share price this year? Only time will tell.
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