Weak euro boosts travel bookings

A weakened euro and the miserable British summer boosted bookings at Thomson Holidays owner TUI Travel today as more people looked to escape to European destinations such as Spain.

Europe's biggest tour operator said overall summer bookings from the UK as of July 29 were 5% down but this marked a "strong improvement" on the 6% decline it reported in April.

Majorca, Ibiza and Menorca among the most popular short-haul destinations, helped by the fall of the euro against the pound, which has made holidays to Europe more affordable.

But the euro's demise still had a bearing on the company, whose brands include First Choice, after it said the exchange rate was set to impact on its profits in the current quarter. Without this it would have exceeded market expectations.

Underlying profits fell 16% to £74 million in the three months to June 30, as sales fell 2% to £3.7 billion, as it was hit by the earlier Easter this year and the poor performance of its French business.

And it warned that its fuel prices, which account for about 10% of its costs, are set to continue rising by about 10% next year although it has already hedged some 60% of these for next summer.

TUI said the summer season had proved "very encouraging" and it has 12% fewer holidays left to sell than last year, although it has reduced capacity by 6%.

It claims to have won share of the UK holiday market, helped by strong demand for its exclusive products such as its Thomson Sensatori resorts, which are aimed at the high end of the market, and Thomson Couples. These accounted for 63% of sales, up from 57% in the previous year.

And its sports division had been boosted by sales of packages and tickets to the Olympics.

Other destinations proving popular this summer include Turkey, Egypt, Tunisia and Morocco, while its long-haul business is being boosted by the popularity of Mexico, Jamaica and Dominican Republic.

TUI said its winter sales had got off to an encouraging start, with Alicante, Malaga and the Canary Islands seeing strong bookings.

Shares were slightly down today. Numis analyst Wyn Ellis said: "Crucially, the outlook for the key summer months is positive, with volumes having improved and late margins strong."

But he reduced his forecast for underlying profits for the year to September by £18 million to £482 million as a result of the effect of the exchange movements. This would still represent a rise on the £471 million last year.

PA