Leisure travel operator TUI intends to “reinvent the holiday” in the coming months as it gears up to resume travel activities. However, as it strives to reduce costs by 30% the company announced Wednesday that it would cut or avoid recruiting around 8,000 staff.
Reducing cost base by 30%
A few months after coronavirus brought the global travel industry to a screeching halt, TUI said, in a statement issued Wednesday, that it would be reopening its first hotels in Germany in the coming days. However, even though January 2020 was the “best ever” booking month in the company’s history, understandably, circumstances have somewhat altered.
In its half-year financial report, the leisure giant describes the COVID-19 pandemic as “unquestionably the greatest crisis the tourism industry has ever faced.” Hence, it is now cutting costs, along with about 8,000 jobs.
“We are targeting to permanently reduce our overhead cost base by 30% across the entire Group. This will have an impact on potentially 8,000 roles globally that will either not be recruited or reduced,” the Group said in the press release.
Normally, TUI employs 70,000 people during the busy summer season and 60,000 during quieter months. Now, many of these seasonal workers will not be rehired by the firm.
“People want to travel”
Despite gloomy forecasts on when travel demand will bounce back, Fritz Joussen, CEO of TUI Group, expressed optimism. He particularly praised the comparative advantages of organized charter travel at a time when a controlled environment may be a selling point for holidaymakers. Joussen also laid out a new vision for his company for the rest of the year.
“People want to travel. (…)The season starts later, but could last longer. For 2020 we will also reinvent the holiday: New destinations, changed travel seasons, new local offerings, more digitalisation.”
We are beginning to see a trend towards gaining leisure travelers’ trust. TUI is currently implementing a ten-point catalog in the Group’s hotels worldwide for increased hygiene and protection measures. And, just last week, holiday operator Corendon said that it will create corona-free environments for its customers.
— TUI Group (@TUIGroup) May 13, 2020
However, even if travelers feel safe and leisure journeys begin to pick back up, the operator acknowledges that it cannot possibly make up for the losses incurred due to COVID-19. TUI said its turnover and earnings would be significantly lower in the current financial year, with cost savings only partly compensating for the slump.
Not in too dire straits
Since the Group was forced to cancel its entire program in March, it has been granted a €1.8 billion ($1.95 billion) bridging loan supported by the German government. So while cost-cutting may be of the essence, TUI seems not to be in too dire straits as of yet.
“With cash and available facilities as well as a number of liquidity enhancing measures, TUI has sufficient funds to cover the coming months,” it says, pointing out that it had total cash and available facilities amounting to €2.1 billion ($2.3 billion) on the 10th of May.
For the thousands of seasonal workers depending on leisure travel and holidaymakers for their incomes though, the situation is grave enough.
Would you be willing to go on holiday abroad before the year ends? Let us know your thoughts in the comments.