TUI makes hotels an offer on payments

BANGKOK, 11 May 2020: Often described as the world’s largest travel firm, TUI Germany is asking its hotel partners worldwide to accept revised debt payment schedules.

In email letters to hotel partners in Thailand and Spain, TUI AG outlined a staggered payment proposal that would clear debts owed to thousands of hotels while asking them to agree to a new contract.

TUI AG offered to pay 25% immediately if hotels agree to the terms, another 25% within 90 days and the balance once the first TUI AG guests check in the hotel under the up-coming winter season contract.

TUI AG books and pays for all its hotel bookings direct with hotel clients rather than through local ground handling agents.

Troubles at the giant travel firm started when it racked up heavy losses linked to the grounding of its Boeing 737 MAX fleet. Covid-19 has since had an appalling impact on the company over the first quarter with share value falling to a third of its value in March alone.

The travel, leisure airline and cruise giant recently secured a USD2 billion bridge loan from the German policy bank KfW to reduce the impact of the Covid-19 crisis. The deal gives TUI access to credit and cash totalling nearly USD3.4 billion.

In Thailand, hotel associations alleged TUI owes an estimated THB2 billion in hotel bookings, but the figure could not be independently verified.

Both Thai and Spanish hotel groups are reportedly considering a legal challenge if negotiations fail to reach a compromise on the debt payment schedule.

Last Friday, leaders of 12 Thai hotel associations who represent resorts in southern Thailand, where most of TUI AG’s hotel partners are located, met with the Tourism Authority of Thailand. They asked for assistance to pressure the company to settle outstanding debts based on current contract terms that stipulate payments are cleared within 30 to 60 days.

They alleged that TUI AG’s latest offer requires hotels to sign a new booking contract for the winter season 2020 to trigger the payment schedule to clear past debts.

Some hotel owners mainly in Krabi, Khao Lak, Phuket and Phang Nga called for a united front to reject the offer. They requested that TUI understand the predicament hotels face. Many of them have already made staff redundant or placed them on unpaid furlough.

TUI’s proposals outlined in emails to hotel partners worldwide present variations on a common theme that offers staggered payments of 25% to clear the debt. In Thailand, the final payment was linked to hotels agreeing to a new contract and the arrival of the first post-Covid-19 guests.

However, hoteliers pointed out that there was no guarantee when that would happen. Some say the first guests from TUI AG to Thailand could arrive in November this year and others place the initial guest check-ins as late as January 2021.

Despite the calls to present a united action in the response to the TUI offer, some hotels in Thailand have already opted for the staggered payments option and signed new contracts. At least one up-scale Phuket resort reportedly accepted a staggered payment schedule that would ultimately clear a debt of around THB6 million in unpaid bookings suggesting last Friday’s meeting failed to gain a consensus on a united response.

TUI is quoted by media in Europe says it has already made significant amounts of advance payments to hotel partners for the European summer season 2020, subject to travel restrictions lifting within the EU.

Having secured bridging loans, the latest from KfW, a Germany policy bank, travel insiders say” TUI  is in a strong position to fill hotel beds with the numbers that the hotels need to survive, but cautioned that it must also be seen to be treating agents and suppliers fairly.”

TUI like other major players in Europe had to temporarily suspend tour operations, flight, hotel and cruise programmes.  Before the crisis, it was described as a healthy company economically successful with strong strategic positioning, structure and substance. The current financial year 2020 had started with extremely strong bookings according to recent statements made by TUI CEO Fritz Joussen.

“Our employees are rightly proud of TUI’s success in recent years, and they should continue to be in the future…The German Government has acted quickly to support jobs and companies during these exceptional times. We are now preparing intensively for when our operations can resume after the Coronavirus crisis … we firmly believe people will continue to want to travel and explore other countries and cultures in the future.”

TUI AG, also known as TUI Group, is an Anglo-German multinational travel company headquartered in Hannover, Germany. It owns 1,600 travel agencies, 400 hotels, five airlines and 18 cruise ships, serving 27 million customers annually.