Tui Raises €500m Fund to Finance New Hotels
Main Photo: The Tui resort in Fuerteventura, Spain
Date: January 2022
Name: Tui Global Hospitality Fund
Locations: Global
Number of Keys: TBA
Europe’s biggest holiday company Tui is making a rare move for the industry, raising a €500m fund from institutional investors to finance new hotels after the pandemic left it with record debt levels. Peter Krueger, Tui’s chief strategy officer, said the Tui Global Hospitality Fund would allow the company to tap into the estimated $80tn pool of capital managed by pension funds and insurers to expand its hotel portfolio without having to invest itself.
“This helps us to return to growth because the crisis was heavy and long,” he said. The Luxembourg-registered fund is intended to be the first in a series that Tui will raise, with the initial round of investment going towards hotels outside Europe. One of Germany’s largest pension funds, which has €12bn under management, has already agreed to provide half the capital.
The pandemic has been acutely difficult for Tui, forcing it to ground it’s fleet of 150 aircraft and close its 420 hotels often for months at a time. Travel restrictions, particularly in the UK where it generates around a third of its revenues, had a big impact on demand for its holidays and its 18 cruise ships have been laid up for most of the past two years.
At the height of the pandemic in 2020, it cut 8,000 staff and was forced to take more than €4bn in state-backed loans from the German government. In October it launched a €1.1bn rights issue backed by its majority shareholder, billionaire Russian steel magnate Alexei Mordashov, to help it pay off some of the debt. It said in December that it had chalked up €2.5bn in pre-tax losses in its 2021 financial year and that the spread of the Omicron variant had hit winter holiday bookings.
The investment fund will allow Tui to return to its pre-pandemic investment levels of around €600m a year but without the same costs. Investors can buy into the fund for a minimum of €10m and Tui will receive management fees for operating hotels.
It will be overseen by the German investment manager Hansa Invest. It is a similar model to a partnership between Kasada Capital Management, a private equity firm and French hotel company Accor, which buys hotels in sub-Saharan Africa that Accor manages.
In a first for the company, Tui will also receive fees for it’s investment advice. “You can say we are entering the asset management advisory business,” Krueger said, adding that with 20,000 employees worldwide, the company often heard about assets for sale before they came to the market. Tui is forecasting a rapid recovery from the pandemic and has said it expects a rush of bookings in the coming days after the announcement this week that testing requirements for vaccinated travellers to the UK would be removed on February 11.
The group has plans to raise a second, considerably larger, fund to focus on European hotels and is exploring future fundraising options for new aircraft and cruise ships — a more difficult sell to investors because, unlike real estate, they are depreciating assets.
Price: €500m
THPT Comment: Interesting move…Tui, together with other global tour operators had reported that it was going asset-lite for the future…so this is an alternative strategy…bold!
First Seen: UK’s FT
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