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TUI Group: From Prussian Coal Mines to the World's Largest Tourism Empire
Introduction & Episode Roadmap
Picture this: A century-old German mining conglomerate, once responsible for extracting coal and forging steel from the bowels of Prussia, somehow becomes the company ferrying millions of Europeans to sun-drenched beaches in Mallorca and Greek islands. TUI AG is a German multinational leisure, travel and tourism company; it is the largest such company in the world.
The scale defies easy comprehension. Serving 33 million customers, TUI offers integrated travel services, including over 400 hotels, 18 cruise ships, five airlines with 130+ aircraft, and 1,200 travel agencies. This isn't a travel agency with a website—it's an industrial-scale operation controlling everything from the aircraft seat to the hotel pillow.
The central question animating this story: How did a heavy industrial relic from the age of Bismarck transform itself into a tourism colossus that has outlasted rivals with pedigrees stretching back to the Victorian era?
"It is hard to think of a comparable transformation in another sector of industry." And that's precisely why this story matters to investors and business observers alike. TUI isn't merely a tourism company—it's a case study in corporate reinvention, vertical integration strategy, near-death experiences, and the complicated dance between state capitalism and private enterprise.
The themes that emerge tell us something profound about how legacy businesses survive disruption: the audacity required to abandon a century of corporate identity, the strategic gamble of vertical integration versus asset-light competition, and the extraordinary circumstances—including €4.8 billion in government bailouts and a Russian oligarch shareholder now frozen by sanctions—that can make the difference between survival and Thomas Cook's ignominious end.
Origins: Two Parallel Stories
The Industrial Lineage (Preussag)
The roots of today's TUI reach back to the smoky, industrial heartland of Weimar-era Germany. TUI's origins date back to 1923 when Preussische Bergwerks und HĂĽtten-Aktiengesellschaft (Preussag) was established as a German mining company. For most of its history, Preussag operated in heavy industry, mining, and metal production.
The name itself tells the story: Preussag—short for "Pruess AG" (Prussia Ltd)—was born as the Prussian state coal and steel company, emerging from the state apparatus to become a corporate entity in the chaotic economic conditions of early Weimar Germany. 1923: Founding of Preussische Bergwerks und Hütten-Aktiengesellschaft (Preussag) as a German mining company. 1959: Preussag shares listed on German stock exchanges.
For over seven decades, Preussag's identity was forged in blast furnaces and coal seams. The company weathered the Weimar hyperinflation, the Nazi era, the devastation of World War II, and the postwar reconstruction—all while remaining fundamentally what it had always been: an industrial conglomerate extracting value from the earth.
The Tourism Lineage (TUI's Birth)
Meanwhile, a parallel story was unfolding in postwar Germany's emerging leisure economy. On December 1, 1968, four German tour operators signed the shareholder agreement for a new enterprise in Hannover, Germany: Touristik Union International, in short TUI. The companies that formed TUI included Touropa, Scharnow-Reisen, Hummel-Reisen, and Dr. Tigges-Fahrten. The latter was a company with roots reaching back before World War II, founded in 1928 by husband and wife Hubert and Maria Tigges in Wuppertal.
Traveling had been a hobby for city college staff teacher Dr. Hubert Tigges. Finally, in 1928, he decided to take a chance and make it a full-time occupation. Tigges invited his brother-in-law Alois Fischer to join the enterprise.
While Preussag's roots were industrial, a parallel tourism lineage that predates the group's 1968 consolidation can be traced to early post-war package travel between Germany and Mallorca. In 1953, commercial relations began between the travel agency Dr. Tigges (one of the forerunners of TUI) and the Riu family's hotel company, founded by Luis Riu Bertrán, offering vacation packages for German tourists to the beaches of Mallorca. The following year, Dr. Tigges agreed to send organised German holidaymakers to the family's newly acquired Hotel Riu San Francisco in Playa de Palma, marking the start of RIU's longstanding cooperation with German tour operators.
This early partnership with the Riu family would prove prophetic—seven decades later, RIU remains one of TUI's most important hotel partners, a reminder that in tourism, relationships compound over generations.
Building the Tourism Conglomerate (1968-1996)
The consolidation of German tourism wasn't accidental—it was a response to fundamental market forces. 1970: German tour operator airtours international becomes part of TUI. By bringing in airtours, which specialized in upscale air travel packages for educated holidaymakers, TUI signaled its ambition to span market segments from budget to premium.
The hotel strategy emerged early. 1972: The company expands into Spain by acquiring hotel chain Iberotel. 1981: TUI establishes the new hotel chain Grecotel with partners in Greece.
But the most consequential move in this era was the creation of what would become one of TUI's signature brands. Founding of the Robinson Club GmbH in 1970, TUI and the Steigenberger Hotel AG, Frankfurt, founded Robinson Club GmbH. The "Jandia Playa" TUI hotel partner in Fuerteventura opened its doors with the new concept as the first ROBINSON Club on January 1, 1971. From that moment, ROBINSON set out to offer a holiday that was significantly different to other holiday hotels around at the time, initially predominantly to German guests. For a group of guests who wanted more than just sun and sand, but also activities, a new concept was born for a sporty, entertaining and sociable holiday, with or without children, singles or in couples.
The Robinson Club model—premium, all-inclusive, activity-focused—predated and arguably influenced the modern resort concept. The hotel became the first ROBINSON Club resort in the world. Back then, Fuerteventura didn't have a tourism infrastructure. There were no phones and no water mains. Electricity was provided by generators and a dirt road connected the airport to the resort.
By the mid-1990s, TUI had evolved from a consortium of travel agents into a vertically integrated tourism company with its own hotels, tour operations across multiple European markets, and increasingly sophisticated systems for packaging holidays. 1995-96: TUI expands into the Netherlands, Belgium, Austria, and Switzerland.
Yet TUI remained a subsidiary—dependent on its various shareholders and lacking the capital structure necessary for truly transformational growth. The company needed a corporate parent with deeper pockets and longer time horizons. It found one in the most unlikely of places.
The Great Transformation: Mining to Tourism (1997-2002)
Michael Frenzel's Vision
The metamorphosis of Preussag from coal baron to holiday provider remains one of corporate history's most radical reinventions. At its center stood Michael Frenzel, a figure whose background suggests nothing of the audacious strategist he would become.
Dr Michael Frenzel (b. 1947) is a German manager and former politician who started his career in banking and under whose leadership TUI Travel Plc would later come into existence. Michael was born in Leipzig, the son of a shoemaker, and later moved with his family to Duisburg where he schooled until 1966. He committed to two years as a regular soldier and a reserve officer candidate in the Bundeswehr, before studying law at the Ruhr University in Bochum. He became closely involved in local politics during the 1970s while studying for his doctorate, which he was awarded in 1980. He joined the Westdeutsche Landesbank (WestLB), DĂĽsseldorf in 1981, where he was promoted to various managerial positions: he became manager of the Industrial Holdings Department in 1983, and overall manager of WestLB's Equity Holdings Division in 1985 - including holdings in banking, leasing and real estate.
In 1988 Frenzel joined Preussag AG as an executive responsible for trading and logistics. He was promoted to the position of chief executive officer in January 1994. During his time as chief executive, Frenzel transformed the company from an industrial conglomerate into a travel services company.
What made Frenzel see tourism where others saw only an industrial legacy? Frenzel joined the Tui group or Preussag, as it then was, in 1988 and led its transformation from a heavy industrial group focussed on coal and steel production.
The logic, in retrospect, was straightforward: European heavy industry faced terminal decline, squeezed between Asian competition and environmental regulations. Tourism, meanwhile, was riding demographic tailwinds—rising incomes, earlier retirement, and the democratization of air travel. Frenzel saw that Preussag's balance sheet strength could fund acquisitions in a fragmented tourism sector, creating scale advantages that no pure-play competitor could match.
The Acquisition Spree
In June 1997, Preussag acquired Hapag-Lloyd AG from the Wessels family for approximately DM 1.2 billion, gaining entry into shipping, cruises, and a 30% stake in TUI, which catalyzed a pivot toward leisure sectors offering higher margins than declining mining. This marked the onset of divestitures in steel and energy—selling assets worth over DM 5 billion by 1999—while consolidating tourism holdings. By decade's end, tourism generated 40% of Preussag's revenues, up from negligible levels.
The pace of transformation was breathtaking. "Plenty of executives could learn from Michael Frenzel: In just two years, the soft-spoken CEO of Germany's Preussag has transformed his steel and engineering company into Europe's biggest travel group."
At that time, Hapag-Lloyd held a 30% interest in the tourism conglomerate TUI (founded 1968), increased to 100% by 1999. In addition, the company acquired 25% of Thomas Cook shares in 1997, which it doubled the following year.
The Thomas Cook stake proved particularly interesting—and ultimately frustrating. Preussag briefly held a controlling position in what would become its greatest rival, but regulatory authorities would soon force a choice.
The Thomson Travel Coup & Thomas Cook Drama
In 2000, Preussag AG, an industrial conglomerate, acquired the UK-based Thomson Travel Group Plc for approximately €1.8 billion, marking a pivotal expansion into the Northern European tourism market.
However, in mid 2000, Preussag acquired Thomas Cook's rival Thomson Travel and was forced to sell its majority 50.1% stake in Thomas Cook by regulatory authorities. In 2002, Preussag renamed itself TUI AG.
This forced divestiture of Thomas Cook would prove one of history's more fortunate regulatory interventions—at least for TUI shareholders. Thomas Cook would stumble through two decades of strategic missteps before collapsing spectacularly in 2019.
On 1 July 2002, the annual general meeting passed a resolution to change the name of Preussag AG to TUI AG.
The symbolism was complete: the Prussian mining company had become, in name and substance, a tourism giant.
Consolidation & The First Choice Merger (2002-2014)
Building Scale Through M&A
TUI AG grew its portfolio through vertical integration, controlling airlines, hotels, and retail agencies across Europe, achieving a market capitalization exceeding €5 billion by mid-decade and positioning itself as Europe's largest tour operator by customer volume, serving over 20 million travelers annually.
The thesis behind TUI's growth was fundamentally about controlling the customer journey. Unlike online travel agents (OTAs) who simply facilitate bookings, TUI sought to own the experience—from the moment a customer browsed vacation options through the flight, hotel stay, and excursions. This vertical integration promised two things: better margins through eliminated intermediary costs, and differentiated products that couldn't be replicated by price-comparison websites.
The First Choice Merger (2007)
TUI announced a merger of its travel division with the British tour operator First Choice in March 2007, which was approved by the European Commission on 4 June 2007, on the condition that the merged company sell Budget Travel in Ireland. TUI held a 55% stake in the new company, TUI Travel PLC, which began operations in September 2007.
This created a complex dual-structure—TUI AG remained listed in Frankfurt while TUI Travel PLC traded in London. The arrangement reflected both tax optimization and the reality of a merged Anglo-German business, but it would eventually create governance headaches that only a full merger could resolve.
The Mordashov Era Begins
One of the more consequential—and ultimately controversial—developments of this era was the entry of Russian capital into TUI's shareholder base.
On 16 April 2009, TUI Travel and S-Group Travel Holding of the Russian shareholder Alexey Mordashov declared the formation of a joint venture in Russia with investments of 30 million euros to develop tourism activities in Russia and Ukraine. The intention was to take over the tour operators VKO Group and Mostravel in Russia and Voyage Kiev in Ukraine, which had over 160 travel agencies and over half a million customers.
Mordashov has been a shareholder in TUI for around 15 years. He is not just any shareholder, but the largest single shareholder in the tourism group with around a third of the shares.
For years, Mordashov's investment appeared symbiotic—Russian capital funding European expansion, with the promise of opening the vast Eastern European tourism market. No one anticipated how dramatically geopolitics would complicate this relationship.
Exiting Shipping, Full Focus on Tourism
A majority stake in Hapag-Lloyd was sold to the Albert Ballin consortium of investors in March 2009, and a further stake was sold to Ballin in February 2012, as TUI worked to exit from the shipping business and to optimize its tourism business with expansion in Russia, China and India under Michael Frenzel.
This represented the final act of Frenzel's transformation. He resigned with effect as of 25th March 2013. With effect from 13th February 2013 he resigned as Chief executive officer of TUI AG.
Frenzel retired from TUI in February 2013, succeeded by Friedrich Joussen.
The Full Merger (2014)
In June 2014, the company announced it would fully merge with TUI Travel to create a united group with a value of $US9.7 billion.
In 2014, TUI AG and TUI Travel PLC merged to form the current integrated tourism group, simplifying the corporate structure and creating one of the world's largest tourism companies. This merger consolidated TUI's position as a vertically integrated provider controlling the entire holiday experience from booking to accommodation, flights, and in-destination services.
The Thomas Cook Collapse & Market Opportunity (2019)
The September 2019 collapse of Thomas Cook represented both vindication and warning for TUI. Some companies define their space, and for decades, this was true of Thomas Cook, the world's oldest travel firm. Longevity was not enough to save it, as it succumbed to mounting debt and pressure from new, agile industry players as well as consumers who became adept at developing their own travel itineraries. Thomas Cook may go down in history books as a sad example of unsuccessful adaptation to changing times.
Thomas Cook has been brought low by a $2.1 billion debt pile, built up by a series of ill-fated deals, that hobbled its response to nimble online rivals.
The collapse could provide a boost, however, to major rival TUI, whose shares surged more than 10% on Monday, and to Europe's overcrowded airline sector, which could benefit from the closure of Thomas Cook's airline business.
Why TUI Survived Where Thomas Cook Failed
The divergence between TUI and Thomas Cook offers lessons in strategic timing and capital allocation.
For much of the past decade TUI Group was obsessed with what it called differentiated product: holidays that couldn't be bought elsewhere. The idea being that the company wouldn't lose market share to cheaper rival online travel agencies if the trips could only be bought through a TUI travel agent or via its website. Having its own fleet of 787 Dreamliners as well as own-branded hotels was the major selling point. For a long time this worked and it's partly why it won out over rival Thomas Cook, which invested much too late in its own inhouse product.
Iconic UK tourism giant Thomas Cook ceased trading on Monday, leaving German rival TUI in a dominant position in the mass-market arena. Analysts said TUI had been in a stronger position than its rival through owning its own cruiseships under brands like Hapag-Lloyd Cruises, Marella Cruises, and its joint venture with Royal Caribbean, TUI Cruises.
Losing one of your biggest competitors is usually a good thing for a business, but in TUI Group's case things are more complicated than they seem. On paper Thomas Cook's bankruptcy earlier this year left a gap in many European markets — one that TUI and others were hoping to fill — the only problem being that several parts of the business survived its collapse.
Yet TUI couldn't rest on its laurels. He states that the "challenging" market environment is "likely to persist" into 2019-20 and that, while its business model is "resilient", TUI needs to focus on becoming more cost-competitive. Joussen says the company is "well-positioned" to become an integrated "digital tourism platform business", with strategic digital initiatives to expand its reach to new markets.
COVID-19: Near-Death Experience & Government Bailouts (2020-2022)
The Crisis
January 2020 marked both TUI's peak and the precipice of disaster. Bookings were at record highs, the summer season looked promising, and Thomas Cook's collapse had cleared competitive space. Then came COVID-19.
In its last set of results, the travel giant said that it had made a €1.1bn loss in the third quarter. Along with many travel and holiday firms, the coronavirus pandemic has utterly decimated Tui, with border closures, health concerns, and travel restrictions destroying travel demand.
The speed of collapse was unprecedented. A company with €18+ billion in annual revenue suddenly had no product to sell. Aircraft sat grounded, cruise ships remained docked, and hotels stood empty.
The Bailout Saga
TUI AG, the world's biggest tour operator, will see its rescue funding topped up to 4.8 billion euros ($5.8 billion) after securing a third tranche of aid from the German government and cash from private investors.
The company has already received €3 billion in state aid from Germany, bringing the total to €4.8 billion (£4.3 billion).
TUI was already Germany's second-biggest coronavirus-bailout recipient, topped only by airline Deutsche Lufthansa AG.
The latest package of 1.8 billion euros will include 1.3 billion euros from the state -- amassed from federal fund WSF, state-run lender KfW and a state debt guarantee -- together with 500 million euros from a shareholder capital increase.
The bailout wasn't free—TUI accepted government silent participations (a form of mezzanine financing), credit lines with significant covenants, and the dilution of existing shareholders through capital increases. The company's survival came at the cost of its pre-pandemic capital structure.
The Mordashov Complication
Russian billionaire Alexey Mordashov's family, which owns just under 25% of TUI shares, said it will participate in the capital increase. "The challenges TUI is facing at the moment are a direct consequence of the pandemic and the resulting travel restrictions," a representative for the family said in a statement. "As a long-standing strategic investor, the Mordashov family has no doubt that TUI's business model is intact and the medium and long-term prospects are extremely positive."
But Russia's February 2022 invasion of Ukraine transformed Mordashov from supportive shareholder to sanctioned liability.
As a result of the war in Ukraine triggered by Russia, the European Union issued new sanctions on 28 February 2022, which additionally include further representatives of the Russian economy. EU sanctions deprive Mr Mordashov of access to the shares he holds in TUI.
As part of the EU sanctions, Mordashov's equity in the company will be frozen, and he loses any right to shareholder dividends. He has no access to his shares, and can't reap any further benefit from TUI's business. However, with his shares frozen, Mordashov remains a 34 percent shareholder of TUI Group. Mordashov, who's been an investor in TUI since 2007 and served on its supervisory board since 2016, controlled a 34 percent stake in TUI with the accompanying voting power.
In March 2022, TUI AG terminated the brand use agreement with TUI Russia; TUI Russia is no longer a TUI Group company. The last shares in TUI Russia were sold in 2021.
At the same time, the Russian investor transferred ownership of his Unifirm group to a British Virgin Islands company named Ondero, which then became a 29.9% shareholder of TUI. The stake is valued at about $1.4 billion. TUI publicly announced the move March 4 but said that it didn't know the identity of Ondero's true owner. What TUI and German regulators apparently didn't know at that time was that Ondero is controlled by yet another shell company, which belongs to Marina Mordashova.
In May 2022, it was reported that the major stakeholder and Russian oligarch Alexei Mordashov had made a transfer of a holding of 29.9% of the company: TUI failed to follow the rules and verify the new owner of the shares. In addition, the transfer was a violation of the sanctions against Russia by the European Union, which sanctioned Mordashov personally.
This frozen shareholding creates ongoing governance complications—voting power that cannot be exercised, dividends that cannot be collected, and uncertainty about the ultimate disposition of a significant ownership stake.
The Recovery & New Strategy (2022-2025)
Leadership Transition
At its meeting today, TUI's Supervisory Board discussed the future set-up of the Executive Board. Current CEO Fritz Joussen had already announced on Friday that he will resign as of 30 September. The Presiding Committee of the Supervisory Board had proposed to appoint the current Chief Financial Officer Sebastian Ebel as the new Chairman of the Executive Board as of 1 October. He is to be succeeded as CFO by Mathias Kiep, previously Group Director Controlling, Corporate Finance & Investor Relations. TUI's Supervisory Board confirmed the Presiding Committee's proposals today.
Sebastian Ebel is CEO of TUI Group, domiciled in Hanover/Berlin. He was appointed a Member of the Executive Board of TUI AG following the merger of TUI AG and TUI Travel PLC in December 2014. Prior to his role as TUI Group CFO, he was responsible for Destination Experiences, Hotels & Resorts, Cruises, and Group Purchasing. As of 1 October 2022 he is the Group's CEO.
Ebel brought intimate knowledge of TUI's operations—having previously overseen the very businesses (hotels, cruises, destination experiences) that would drive recovery.
Financial Recovery
TUI Group has unveiled its full-year financial results ending 30 September 2024, showcasing substantial growth and alignment with strategic guidance. The company reported a 12% increase in revenue to €23.2 billion and a 33% rise in underlying EBIT to €1.3 billion. This growth was driven by robust performance across its Hotels & Resorts and Cruises segments, bolstered by strong consumer demand and an enhanced product offering.
The group managed to serve 20.3 million customers, a 7% increase, with an average load factor of 92%. Operating cash flow improved by €0.3 billion to €1.5 billion, contributing to a reduction in net debt by €0.5 billion. Notably, TUI's credit rating improved, with S&P and Moody's upgrading their outlook to B+ and B1, respectively.
The repayment of all government funds from the pandemic programs has been completed, management has been restructured and operations have been strengthened. The Group has recently reported double-digit growth in underlying EBIT for eight quarters in a row. TUI is not only growing in existing markets with new products and new customers, but also aims to grow globally outside of Europe.
The current contracts of both members of the Executive Board run until September 2025. The new appointments will run until September 2028.
TUI AG's FY 2025 results shine with a 12.6% EBIT surge, outpacing forecasts and highlighting strong performances in key sectors.
Strategic Shift: Becoming More Like OTAs
But in the post pandemic world, things are different. TUI took a hammering, becoming quasi-nationalised and its long-serving CEO decided it was time to move on. At the same time it appears its strategy is subtly changing with the company moving on from the core set of beliefs that have underpinned the business for the last 10 years.
TUI has not only broadened its product portfolio through dynamic packaging but also by selling hotels on their own. This isn't something TUI is known for and should it prove successful it will bring them into more direct competition with the likes of Expedia and Boooking.com. "TUI has not been recognized as someone you would have top of the mind when you book a hotel only. We … now have access direct content -- direct access to the content supplier like hotels, and we bring it directly to the customers through web, through app and, of course, also through retail."
Delisting from London
At today's 65th Annual General Meeting, the shareholders of TUI AG, laid the foundation for the planned delisting from the London Stock Exchange. Shareholders voted clearly in favour of the proposed change to the Group's dual listing and voted by a large majority (98.35 per cent) to delist from the London Stock Exchange. The next step will be the start of trading of the TUI share in the Prime Standard in Frankfurt at the beginning of April.
"Trading in TUI shares had already shifted to Germany to a large extent. The advantages of a main listing in Frankfurt are obvious: the structures are simplified, liquidity is centralized and improved in one trading venue, and the simplified structure supports EU requirements for ownership and control of our airlines."
TUI Group has been dual-listed since 2014 due to its merger with UK-based TUI Travel. The holding owns TUI fly (Germany), TUI fly (Netherlands), TUI fly (Belgium), TUI fly Nordic, and TUI Airways.
Business Model Deep Dive: The Vertically Integrated Tourism Machine
The Asset-Right Strategy
TUI's competitive positioning rests on a fundamental bet: that controlling the entire holiday value chain creates advantages that pure intermediaries cannot replicate.
The company's vertically integrated model spans the entire tourism value chain, from booking advisory to post-travel services, operating across multiple European source markets including Germany, the United Kingdom, Belgium, the Netherlands, and the Nordic countries.
The "asset-right" strategy—distinct from both "asset-heavy" and "asset-light" approaches—means owning assets where they create differentiation (premium hotels, cruise ships) while relying on partnerships where ownership adds little value (commodity accommodation, local transportation).
Hotels & Resorts
These activities involve the operation of 353 hotels with 275,144 beds and it allows its brand to be used for another 65 hotels operated by third parties. These hotels accommodate 21 million guests a year.
Hotels & Resorts surpassed its already strong operational performance of the prior year with an underlying EBIT of 668 million euros (previous year 549 million euros). The results were driven by an improved operational performance across its key brands, in particular Riu. Average daily rates grew by 7 per cent year-on-year to 93 euros.
The hotel portfolio spans multiple brands targeting different segments:
Riu Hotels & Resorts is a renowned hotel brand with proven quality and excellent service. Riu provide guests with comfortable accommodations and offers its All Inclusive by RIU service in over 75 per cent of its resorts. The company was founded in Mallorca by the Riu family in 1953 and is still owned by the family's third generation. TUI Group's long-standing joint venture partner has more than 90 hotels in over 20 popular holiday destinations and in selected cities worldwide. A particularly large number of resorts are located in Mexico, Spain and in the Caribbean.
ROBINSON is one of the leading providers of club holidays in the premium segment. The portfolio includes 26 clubs in 15 countries, located directly by the sea, on scenic lakes or in the mountains. ROBINSON is characterised by a large and innovative range of sports and entertainment activities and offers its guests first-class event weeks with renowned experts.
Robinson Club GmbH, a subsidiary of TUI AG headquartered in Hanover, is the German quality and market leader for resort holidays within the premium segment. The portfolio currently contains 26 club resorts in 15 countries with a capacity of about 16,000 beds.
Cruises
The Cruises business consists of TUI Cruises, Hapag-Lloyd Cruises and Marella Cruises. Overall the fleet consists of 17 vessels.
TUI Cruises is a cruise line based in Germany. It was formed in 2007 as a joint venture between the German tourism company TUI AG and the American cruise line operator Royal Caribbean Group, each of which owns a 50% stake in the company. The company started operations in 2009 and competes with AIDA Cruises for the German market. It targets German-speaking customers who opt for a premium cruise experience.
In the Cruises segment, the very positive development continues. TUI Cruises is one of the most profitable major shipping companies in the world. With cutting-edge vessels, diversity, attractive itineraries and outstanding service. We are continuing to invest, with the arrival of Mein Schiff 7 in June 2024 and two more newbuilds in the next two years.
The segment saw a major increase in underlying EBIT, rising to 374 million euros from 236 million euros in 2023. Occupancy rates across TUI's three cruise brands—TUI Cruises, Hapag-Lloyd Cruises, and Marella Cruises—averaged 99% (up from 94% the previous year). The number of available passenger cruise days also rose by 2%, reaching 9.7 million, compared to 9.5 million in 2023.
TUI Cruises has taken delivery of Mein Schiff Relax, the first of two LNG dual-fuel cruise ships being constructed by Fincantieri. According to Fincantieri, Mein Schiff Relax is set to run on a dual-fuel propulsion system, with the capability of operating on LNG and marine gas oil (MGO). The Italian shipbuilder also underscored that the vessel is considered future-proof, thanks to the possibility for it to use low-emission fuels such as bio- or e-LNG.
Airlines
It also operates 16 cruise ships under the TUI Cruises, Hapag-Lloyd Cruises and Marella Cruises brands, as well as a fleet of 134 aircraft.
The airline operations serve primarily as feeders to TUI's package holidays rather than as profit centers in their own right. This distinguishes TUI from low-cost carriers—the aircraft exist to fill hotel beds, not to maximize seat revenue.
Experiences & Activities (TUI Musement)
TUI Group has acquired Milan-based tours and activities startup Musement for an undisclosed amount in what has been an active year for the global tours and activities sector. TUI said it has big plans for its newly enlarged tours and activities business earlier this year when it bought a destinations services business from Hotelbeds Group for $136 million. TUI estimates the global tours and activities sector is worth $174 billion with a 7 percent annual growth rate.
TUI Musement is a global Tours & Activities business that combines a highly curated product portfolio, scalable digital platforms and in-destination service by local teams, to source, develop, distribute and deliver products in three categories: Experiences: Excursions, activities & attraction tickets. Available in all major beach and city destinations, products are sourced from leading travel businesses or developed in-house by TUI teams, including the TUI Collection, the flagship experiences portfolio of TUI Group, and National Geographic Day Tours, unique and immersive small group guided experiences. Products are distributed to customers, including the millions of TUI customers, through TUI websites and apps.
TUI Musement is TUI Group's Tours & Activities division, and combines a highly curated product portfolio, scalable digital platforms and in-destination service by local teams, to source, develop, distribute and deliver transfers, multi-day tours and experiences, including excursions, activities and attraction tickets, in all major beach and city destinations around the world. TUI Musement is one of the major growth areas of the TUI Group and employs approximately 7,000 people worldwide.
Bull Case vs. Bear Case: Strategic Analysis
The Bull Case
Travel as a Secular Growth Industry: Demographics favor leisure travel. Aging populations in wealthy countries have more time and savings for holidays. Rising middle classes in emerging markets add demand. Climate change, paradoxically, may increase demand for "escape" travel from overheated cities.
Vertical Integration Creates Moats: TUI's ownership of hotels, cruise ships, and airlines creates barriers to entry that pure OTAs cannot replicate. When TUI creates an exclusive resort or cruise itinerary, no competitor can offer the identical product at a lower price.
Recovery Momentum: Looking ahead, TUI's FY2025 guidance anticipates revenue growth of 5%-10% and underlying EBIT growth of 7%-10%, despite the current higher cost environment.
Balance Sheet Repair: The positive cash flow resulted in a significant reduction in net debt. With a leverage ratio of 0.8x, we remain on track to achieve our medium-term target of strongly below 1.0x.
Platform Transformation: TUI's shift toward dynamic packaging and standalone hotel bookings opens new revenue streams without the capital intensity of traditional tour operating.
The Bear Case
Asset-Heavy in a Capital-Light World: Booking.com and Expedia generate similar customer volumes with a fraction of TUI's capital base. Every hotel TUI owns is capital that could be deployed elsewhere—or returned to shareholders.
Geographic Concentration Risk: TUI remains overwhelmingly European in both source markets and destinations. Economic weakness in Germany or the UK disproportionately affects the business.
Oligarch Overhang: TUI admitted it was looking for a new majority shareholder, 10 months after EU sanctions forced the resignation of Alexei Mordashov. Vladimir Putin ally and Russian billionaire Alexei Mordashov became a target of Europe's sanctions against Moscow following Russia's invasion of Ukraine in March 2022. The sanctions meant TUI was left scrambling for a new shareholder.
OTA Competition: Booking.com and Expedia have vastly superior digital capabilities and customer acquisition machines. TUI's digital transformation, while progressing, lags pure-play tech competitors.
Cyclicality: Travel remains discretionary spending. Any recession would hit TUI's volumes and yields simultaneously.
Porter's Five Forces Analysis
Supplier Power (Moderate): TUI's scale creates bargaining leverage with hotels, but aircraft manufacturers (Boeing, Airbus) and shipbuilders have concentrated market power.
Buyer Power (High): Customers can easily comparison shop. Price transparency has increased dramatically, compressing margins industry-wide.
Threat of Substitutes (Moderate): "Staycations" and alternative experiences compete for leisure spending. However, the desire for sun-and-beach holidays shows remarkable persistence.
Threat of New Entry (Low-Moderate): Capital requirements for integrated tourism are substantial, but digital platforms have lowered barriers for tour operating.
Competitive Rivalry (High): The OTAs, regional tour operators, and airline carriers create intense competition on multiple fronts.
Hamilton Helmer's 7 Powers Analysis
Scale Economies: TUI benefits from purchasing power in aircraft, hotel contracts, and destination services. However, these advantages are partially offset by complexity costs.
Network Effects: Limited. Unlike OTAs, TUI's value doesn't increase multiplicatively with user growth.
Counter-Positioning: TUI's vertical integration represents counter-positioning against asset-light OTAs. The question is whether the advantages justify the capital requirements.
Switching Costs: Low for individual travelers, but corporate and group business may develop relationship stickiness.
Branding: Strong in Germany and UK. TUI's smile logo has significant awareness in core markets.
Cornered Resource: The RIU partnership and certain exclusive resort locations represent difficult-to-replicate assets.
Process Power: TUI's decades of experience in managing integrated holiday operations creates institutional knowledge that cannot be quickly replicated.
Key Performance Indicators to Track
For investors monitoring TUI, three metrics deserve particular attention:
1. Hotels & Resorts Average Daily Rate (ADR) and Occupancy
This measures TUI's ability to extract premium pricing from its owned hotel inventory. In FY2024, average daily rates grew by 7 per cent year-on-year to 93 euros. Sustained pricing power indicates brand strength and product differentiation.
2. Holiday Experiences Underlying EBIT Margin
The Holiday Experiences segment (Hotels & Resorts, Cruises, TUI Musement) represents TUI's highest-margin, most differentiated business. In Holiday Experiences, which comprises Hotels & Resorts, Cruises and TUI Musement, underlying EBIT rose by 270 million euros year-on-year to 1.1 billion euros. Tracking this segment's EBIT margin reveals whether TUI's vertical integration creates sustainable economic profit.
3. Net Debt to EBITDA Leverage Ratio
Balance sheet health determines TUI's strategic flexibility. "With a leverage ratio of 0.8x, we remain on track to achieve our medium-term target of strongly below 1.0x." This ratio indicates capacity to weather downturns, fund fleet renewals, and potentially return capital to shareholders.
The Road Ahead
TUI enters 2025 as a company transformed—not once, but twice. The first transformation, from Prussian coal miner to European tourism giant, took two decades under Michael Frenzel's leadership. The second transformation, from pandemic casualty to recovering growth story, is still underway under Sebastian Ebel.
TUI is not only growing in existing markets with new products and new customers, but also aims to grow globally outside of Europe – with a scalable and dynamic range of tour operators, as well as new hotel clusters. For Hotels, the focus is on North, West and East Africa, and Asia, while new sales markets include Spain, Portugal, Latin America and Eastern Europe. TUI has been providing holiday experiences worldwide for decades, and will now leverage this global brand awareness to win local customers in countries that have traditionally been TUI destinations.
"TUI is accelerating its transformation and thus creating the basis to continue playing a leading role in the rapidly growing global tourism segment. The tourism sector is healthy and continues to grow faster than the overall economy even after the pandemic. Travel is and will remain a global megatrend for the foreseeable future."
The central tension remains unresolved: Can a vertically integrated tourism company create enough value through ownership to justify the capital intensity? Or will the asset-light OTAs—Booking.com, Expedia, Airbnb Experiences—ultimately prove that intermediation beats ownership in the digital age?
What we know is that TUI has survived challenges that destroyed competitors. The company that once extracted value from Prussian soil now extracts value from human wanderlust. Whether that proves a durable franchise or a transitional business model is the question every TUI investor must ultimately answer.
Material Regulatory and Legal Considerations
Mordashov Shareholding: The frozen ~30% stake held through entities linked to sanctioned Russian oligarch Alexei Mordashov creates ongoing governance uncertainty. German regulators continue reviewing the ownership structure.
Package Travel Directive: EU regulatory changes could affect liability requirements and competitive positioning relative to OTAs.
Airline Ownership Rules: EU requirements for majority ownership by EU citizens affect TUI's capital structure flexibility. The London delisting partially addressed this concern.
Climate Regulation: Aviation and cruise emissions face increasing regulatory scrutiny. TUI's investment in LNG-powered cruise ships and sustainable aviation fuel represents partial mitigation.
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