TUI’s Hapag-Lloyd Cruises brand is to be integrated into the TUI Cruises joint venture with Royal Caribbean Cruises (RCCL), a structure that was established in 2008.
By adopting this strategy, TUI Group and RCCL will further develop their luxury, expedition and premium cruise segment and attract new target audiences for luxury cruise products.
A contract signed in Hamburg this month valued Hapag-Lloyd Cruises at €1.2 bill. The closing of the transaction is expected this summer. Under the joint venture profit-sharing agreement, TUI will report 50% of Hapag-Lloyd Cruises’ earnings.
This transaction is in line with TUI’s previously stated objective to deliver additional profitable growth at a lower level of capital intensity, the company said.
TUI Group’s plans for the expansion of the cruises segment will be expedited by this transaction. Due to limited global shipbuilding capacity, TUI Cruises’ Mein Schiff brand is not scheduled to take delivery of the next three newbuildings until 2023, 2024 and 2026.
The integration of Hapag-Lloyd Cruises in the joint venture will allow TUI to participate in global cruise industry growth at a low level of capital expenditure and will create a leading European cruise company with a current combined fleet of 12 ships.
TUI Cruises and Hapag-Lloyd Cruises will continue to operate their product concepts in the future. TUI Cruises will continue to cater to the premium German-speaking segment, while Hapag-Lloyd Cruises will continue to have an exclusive presence in the luxury and expedition ship segment.
“The ships’ identities, service, quality and customer experience will remain as individual and unique as they are today. This will create significant advantages for the Group, for our expansion and for our investments,” explained TUI CEO, Fritz Joussen.
Hapag-Lloyd Cruises fleet currently consists of two luxury ships within the five star plus category and three expedition cruise ships. A further expedition cruise ship has been ordered and will be added to the fleet in 2021 to replace ‘Bremen’.
In light of this transaction, it is possible that the luxury and expedition fleet will grow in the coming years, TUI said.
“Products and brands such as ‘Europa’ and ‘Europa 2’ have international potential and appeal. Going forward, this will enable us as shareholders to take a capital-light approach to financing the ships and international growth within a joint venture framework. TUI and RCCL have developed the joint venture company on the basis of a strong partnership over the past 10 years.
“The expansion decision is the next big step of growth for us – from a strategic and a commercial perspective,” Joussen added.
Each partner will continue to depend upon its core strengths – TUI’s strong brand and selling power combined with ECCL’s shipbuilding, operational and digital expertise.
TUI Group will use the transaction proceeds to strengthen the Group’s balance sheet and to drive its transformation into a digital organisation. The first stage of the transformation, which began in 2013, saw the company evolve from a traditional tour operator model into a successful developer, investor and operator of hotels and cruise ships, as well as destination activity provider.
The next phase – TUI’s transformation to a digital platform organisation – has already begun. Digital business models, as well as the Hotels, Resorts and Cruises divisions, will be the TUI Group’s mainstays in the future. However, growth and investments in hotels and cruise business will be less capital intensive. This ‘asset light’ strategy was announced in December, 2019.
