TUI's €40 Million Middle East Detour: Cruise Expansion Offsets Persistent Booking Weakness

Travel giant TUI lowers profit forecast after €45M hit from Iran conflict and hurricane, while cruise division surges with 26% EBIT growth and 93% occupancy.

Investors are wrestling with two versions of TUI. One involves gleaming new cruise ships and rising profits at sea. The other features a grounded core business, a slashed profit forecast, and a share price trading nearly a third below its 52-week peak. The gap between those narratives is widening, and the market is pricing in the gloomier one.

The German travel group booked a €45 million hit from two external shocks in its second quarter — the Iran conflict's fallout in the Persian Gulf and a hurricane in Jamaica. The combined drag equates to roughly 40 million euros in extra costs from rerouting cruise ships alone, according to the company. For seven weeks, Mein Schiff 4 and Mein Schiff 5 were forced to steam around Africa after the Strait of Hormuz became impassable, requiring some 5,000 passengers to be flown home. TUI has since pulled its planned Orient itinerary for the new Mein Schiff Flow in winter 2026/27, substituting North and South European routes instead. The group has also trimmed overall risk capacity by 4 to 5 percent in a bid to hold the line on pricing.

Those operational consequences are now baked into the numbers. For the first half of its financial year, TUI reported an adjusted EBIT of minus €111 million — better than the year-earlier winter period — while the second quarter alone showed a €18.5 million improvement to minus €188.3 million. The group nevertheless lowered its full-year adjusted EBIT target to a range of €1.1 billion to €1.4 billion, down from expectations of 7 to 10 percent growth over the prior year's €1.413 billion. The revenue forecast was suspended entirely.

The broader booking picture underscores why management felt compelled to act. Summer demand for flight-and-hotel packages has shifted decisively to the western Mediterranean, with Spain, the Balearics and Greece still drawing strong interest, while Turkey, Cyprus and Egypt are falling out of favour. Customers are booking much later in the cycle: almost half of potential summer travellers have yet to reserve anything. Booked revenue in the airline and tour operating segment is currently 7 percent below last year's level, and hotel occupancy for the second half is tracking 7 percent lower.

The cruise division, by contrast, is firing on all cylinders. Its adjusted EBIT jumped nearly 26 percent in the first half to €163.5 million, with vessels running at an average occupancy rate of 93 percent. S&P recently lifted its outlook on TUI Cruises to "positive", reflecting the successful absorption of new tonnage. The next addition, Mein Schiff Flow, is scheduled to be christened in Trieste on June 20. Meanwhile, TUI Musement sold 1.6 million excursions and activities in the second quarter, and 83 percent of the summer's jet fuel requirements have been hedged — a buffer against energy price volatility, but no cure for softening demand.

Analysts remain broadly constructive despite the turbulence. Deutsche Bank reiterated its "buy" rating with a €10.50 price target on May 13. JPMorgan also rates the stock "overweight", citing the flexibility of TUI's structure. Barclays trimmed its target to €9.00 but kept an "overweight" call. Those targets sit a long way from reality. The shares closed at €6.40 on Friday, down roughly 28 percent since the start of the year and about 32 percent below their 52-week high of €9.41. The relative strength index of 38.4 points to oversold territory, yet buying pressure remains elusive. The stock is also well below its 50-day moving average of €6.84.

Management will have a chance to make its case to the market next week. A roadshow kicks off in London and the Benelux countries on May 19, followed by an investor conference on May 26. By then, the board will need to offer concrete numbers on the crucial peak-summer period. Whether the gap between analyst optimism and share price pessimism narrows will ultimately hinge on two unknowns: the trajectory of summer bookings over the coming weeks, and the direction of the Middle East conflict. TUI has hedged its fuel costs, but hedging can't solve a demand problem.