Do-It-All Tour Operators Continue Their Decline

By Jon Sindreu

Tour operators that run everything from travel agencies to airlines, cruise ships and hotels are a uniquely European business model that seems to be nearing its final days. On Tuesday, shares in TUI AG (TUI1.XE) fell more than 4% after the German company reported earnings that fell short of already-depressed expectations. They are down 40% over the past six months.

The slowdown in the European economy is the latest factor casting doubt on the profitability of vertically integrated tour operators--following the rise of comparison-engine companies like Expedia Group Inc. (EXPE) and Booking Holdings Inc. (BKNG), which have torpedoed traditional travel agencies. TUI's hotels and cruise ships keep doing well, analysts at UBS pointed out, but the idea that it's easier to fill them efficiently by running an airline and a network of travel agencies doesn't seem to be working.

TUI's main competitor, London-based Thomas Cook Group PLC (TCG.LN), is doing even worse, because it has a much smaller focus in these few profitable areas. Its stock has dropped almost 70% in the last six months, and managers have said they are studying the sale of the airline division. In this case, less definitely seems to be more.

Write to Jon Sindreu at jon.sindreu@wsj.com

(END) Dow Jones Newswires

February 12, 2019 06:15 ET (11:15 GMT)

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