TUI AG, Europe’s largest tour operator, said demand for summer vacations in Turkey tumbled about 40 percent following a suicide bombing at a tourist attraction in Istanbul last month.
Mid-2016 bookings for the popular travel destination fell as families that flocked to Turkey’s Mediterranean beaches seek alternatives after the bombing in January killed 11 Germans, TUI’s largest customer group. Customers are instead planning holidays in Spain, contributing to a 13 percent jump in average revenue per bed at TUI’s Riu hotel chain and leading to a capacity squeeze in the country, Chief Executive Officer Fritz Joussen told journalists on a conference call.
Spain is “pretty much sold out,” Joussen said. Pricing there and in other countries viewed as less prone to terrorism will remain high because hotel operators won’t have to offer last-minute discounts to fill empty beds, he said.
Recent terrorist attacks in Turkey, Egypt and Paris have made security a key concern for many vacationers. Shifting clients to similarly priced destinations is becoming increasingly difficult as empty beds in locations perceived as safer are becoming scarce. While bookings for Turkey could still come later, a sustained drop will be hard for the travel industry to absorb. About one in seven of TUI’s customers went to Turkey last summer, and travel warnings by several governments have already closed parts of Tunisia and Egypt to European tourists since last year.
TUI fell 2.7 percent to 1,068 pence as of 8:12 a.m. in London. The stock has dropped 12 percent this year, valuing the company at 6.27 billion pounds ($9.1 billion).
Revenue in the fiscal first quarter ended Dec. 31 rose 5.4 percent to 3.72 billion euros ($4.16 billion), TUI said in a statement on Tuesday. The seasonal loss, measured as underlying earnings before interest, taxes and amortization before currency fluctuations, narrowed to 97.3 million euros from 104.8 million euros a year ago. The company again wrote down the value of its 12.3 percent stake in container shipper Hapag-Lloyd AG, incurring a charge of 41.6 million euros. TUI reiterated that underlying earnings excluding exchange-rate shifts will increase at least 10 percent in the year through Sept. 30.
“Our first quarter was very strong,” said Joussen. “But the big challenge this year is yet to come, and that is Turkey.” Even so, demand for Turkish locations “will come back very fast” once the country is deemed to be safe, the CEO told analysts on a call.