TUI's Two-Track Recovery: Cruise Ships Sail Ahead as Summer Packages Lose Steam

Package holiday weakness and geopolitical risks weigh on TUI shares, even as cruise occupancy hits 93% and daily rates climb.

TUI has racked up 14 consecutive quarters of earnings growth, a feat that would normally draw cheers from the market. Instead, the stock is mired near its 52-week low, punished by a cocktail of geopolitical uncertainty and shifting holidaymaker behaviour that has left the group’s core package-tour business struggling to keep pace with its buoyant cruise division.

The cruise arm proved the standout performer in the first half. Occupancy reached 93%, and would have hit 98% but for the disruption in the Persian Gulf, where Mein Schiff 4 and Mein Schiff 5 were stranded between April and mid-May. Higher onboard spending and rising daily rates more than compensated for the lost sailings. The average daily rate at TUI Cruises climbed to €223 in the second quarter, while Marella Cruises achieved £205. Capacity continues to expand: passenger cruise days rose 10% year-on-year to 2.9 million in the first half, and the arrival of Mein Schiff Flow in mid-June will add another 6% of capacity in the second half.

Package holidays tell a less encouraging story. Summer bookings are running 7% below last year’s level, with the sharpest declines in Turkey, Cyprus and Egypt. That has squeezed working capital, as fewer advance customer payments flow into the group’s coffers. Chief executive Sebastian Ebel insists the shortfall is a matter of volume, not margin, and notes that demand for the western Mediterranean remains stable. Even so, TUI has trimmed risk capacity by 4-5%, particularly in response to cautious spending from the British market.

The group’s response to geopolitical turbulence has been swift. TUI pulled fixed capacity from the eastern Mediterranean and redeployed cruise ships to Trieste and Heraklion. CEO Ebel is focusing on southern Europe and the Canary Islands, where pricing power and occupancy look more assured. One-off charges of around €45 million stemming from the Middle East tensions weighed on second-quarter earnings, but the group has also locked in fuel costs for next summer: 83% of its kerosene needs for summer 2026 are hedged, providing a buffer should the situation escalate.

Financially, the second quarter highlighted the pressures. Adjusted operating profit, on a currency-adjusted basis, came in at minus €188.3 million — typical for the loss-making winter season, but a number that disappointed analysts. Revenue held steady at €3.7 billion, marginally below expectations. Earnings per share of minus €0.64 also missed the consensus forecast of minus €0.54. For the full year, management targets adjusted EBIT of between €1.1 billion and €1.4 billion. CFO Mathias Kiep cautioned that reaching the upper end of that range depends on a swift recovery in the Turkish market.

Analysts remain broadly constructive. JPMorgan rates the stock Overweight, citing the integrated business model that allows TUI to tweak supply and pricing in real time. Deutsche Bank also keeps a Buy recommendation, pointing to continued debt reduction. Yet investors are unimpressed. The shares closed at €6.40 on Friday, representing a 28% decline since the start of the year and a 32% slide from the 52-week high of €9.41. The relative strength index of 38 indicates weak technical momentum without signalling an oversold condition.

The summer season will decide whether TUI’s operational discipline can finally break the market’s scepticism. CEO Ebel has stressed that the group will avoid ruinous price cuts, even if that means sacrificing market share in troubled areas. For now, the cruise ships are sailing ahead, but the package-tour business is still waiting for the wind to turn.