Europe's biggest travel company TUI Travel said summer bookings were up strongly and its first-quarter result had improved as customers seek more exclusive, five-star holidays.
London-listed TUI Travel, controlled by German group TUI AG, said its underlying operating loss for the first quarter had narrowed by some 20 million pounds ($31.8 million) from a year-earlier 107 million. Results are due next week.
TUI Travel said overall bookings were up between 8 and 16 percent in its key markets on demand for 'differentiated', higher-margin products, such as five-star Sensatori hotels or holiday villages designed for families.
"In the UK … bookings for differentiated products are up 26 percent and we expect these products to represent half of all holidays sold over the full season," it said in a trading update to accompany an investor day.
Chief Executive Peter Long said it plans to focus on rolling out these products to offset margin pressure on mass-market trips, being felt due to competition from online booking sites.
It also plans to expand online and invest in its accommodation-only businesses. However, it remained cautious given the uncertain economic and geopolitical environment.
Unrest in Tunisia resulted repatriating customers, while a contraction in fourth-quarter GDP prompted warnings of a grim 2011 for the British economy.
BUYOUT
The company, which competes with Thomas Cook, also said it could make a further 40 million pounds of cost savings at its UK business and central functions.
Its UK operations came under scrutiny last year after accounting errors led to the departure of finance chief Paul Bowtell, two further directors and the company's auditors, KPMG.
While shares in TUI Travel were down 0.3 percent at 270.5 pence at 0931 GMT, shares in German parent TUI gained 3 percent to the top of the mid-cap leaderboard.
Equinet analyst Jochen Rothenbacher upgraded his recommendation to "hold" from "reduce", based on a higher share price for TUI Travel and a higher value for TUI's stake in shipping firm Hapag-Lloyd.
TUI Travel was formed in 2007 through a tie-up between the travel division of Germany's TUI AG and Britain's First Choice.
Analysts expect 54-percent shareholder TUI AG to use the proceeds from the spin-off of its stake in Hapag-Lloyd to buy out the rest of the British firm.
"We would not expect such a transaction in the short term as the disposal of the Hapag-Lloyd assets needs time, a new financing structure would have to be implemented and an option would be a share deal combined with a capital increase of TUI," Rothenbacher said.
Activist TUI shareholder and shipping magnate John Fredriksen, this week said he had increased his stake in TUI Travel to 3.3 percent via his Monteray vehicle.
TUI Travel releases full first-quarter results on Feb. 3.
