TUI AG

XETRA:TUI1

Earnings Call Transcript 2018-Q1

[Operator]

Ladies and gentlemen, good morning, and welcome to the TUI AG conference call regarding Q1 results 2018. [Operator Instructions]Let me now turn the floor over to your hosts, Mr. Friedrich Joussen and Mr. Horst Baier.

[Friedrich Joussen, Chairman of Executive Board & CEO]

Good morning, and very sorry for actually my delay. I'm running a little bit late, but I will be having enough time, and hopefully, you will allow me the time as well.So turning directly into my presentation, I would like, before I start showing you results on Q1, preface for one change in reporting and explain a little bit why we are doing it. And on Page #4, you see Destination Services, a separate line of reporting, which we will be then opening effective now from Q1. What is Destination Services? Destination Services is actually our activities in destination. So as you know, we are vertically integrated. We have actually sales and marketing. We have the flights. We have Destination Services as well as hotels. And when you look at the numbers, the numbers are impressive. We serve more than 12 million guests on transfers. We serve more than 4.5 million guests on tours and activities, so people who buy something with us. And we believe this is actually a very strategic initiative because of several reasons. The first reason is, it is a market which is growing and it is a market which is actually still very diverse. So you have a lot of players with small market shares, and we are already a giant in that market. We are market-leading, and we believe we can be growing faster.And that is actually the second reason because of -- we have talked about our new customer data and CRM platforms. And one of the results of customer data and CRM, that we are earlier with customers than anybody else in destination management, meaning we will be in the position to offer excursions and -- in destination activities already when customers have actually not arrived in destination. And we will be playing that. I mean, that is a huge differentiator, and therefore, we will be growing fast. And we assume that if we do it right, it will be one of the strong growth drivers also in the future. So you should expect some activities. You should expect some investment. You should expect an extension of our destination portfolio. You should expect an extension of our activity portfolio in the future and some investments as well. And therefore, we have actually decided to separate this, actually, activity out.And actually, together -- and this actually is now Page #6, historically, it was in Other Tourism, and now we have actually separate Destination Services out. The remaining part of Other Tourism goes to All Other Segments. The Destination Services part, together with Hotels and Cruises and Destination Services, will make Holiday Experiences. And we also have said that we believe that, that kind of -- or that this activity this year, where it is still actually very early days, will grow this 15% in profitability. So it is already growing faster than the average, and we are just in the initial phase, so we believe it is the right thing to do. It is more clarity. It is one of the strategic pillars, and we call it a hidden champion. We have to prove it will be a hidden champion, but we are very confident.So that said, let me turn now to Q1. The Q1 was a strong one, up in turnover 9.1%; underlying EBITA up 58%; reported EBITA, 35%; and we, of course, confirm our guidance, this 10%. Then you look at the turnover, a little bit less than half, 4.5% of the 9.1% are related to more customers, the other are related to higher prices. But you see also more customers, that says something about winning market shares and being strong in the market.That said, when you look at the bridge for the first quarter, you will see we come -- for financial year '15, the first quarter was minus EUR 89 million. Last year was minus EUR 60 million. This year is minus EUR 25 million. And then you see the bridge between minus EUR 60 million and minus EUR 25 million, you see Holiday Experiences up EUR 11 million, mainly driven by Cruises. Sales and marketing, up EUR 17 million. This is very good. I think '16, by trading of our central market mainly is a very strong driver. Then you have minus EUR 11 million, all other segments, that is actually Corsair mainly driving that result. And then we have actually 2 nonrecurring effects, plus EUR 38 million from sales of 2 hotels of Riu and minus EUR 20 million for a last-time effect of the Air Berlin, Niki insolvency, which we have booked.Now on Holiday Experiences, Hotels & Resorts, a strong development. Of course, the aperiodic EUR 38 million sell-off of Riu was important. But I think what is good is our general occupancy is up 73% to 75%. This is related to mainly that North Africa is now coming, but particularly Egypt. In the bookings, we also see Turkey coming back strong. But of course, in the winter revenues, you don't see it because Turkey is not a winter destination. Also, the openings of new hotels are in line, and you see 35 openings since merger, so we are progressing very well. By the way, 60% of which are low capital intensity, and I think that's also stating that we invest where actually the returns are high and where the returns are not so high because the seasons are short or whatever, we don't invest.Now on Cruises. TUI Cruises and Marella Cruises, strong increases of the passenger days, both around about 30% and, at the same time, increases of average daily rates. So that shows how elastic the market is. Of course, occupancy in the yield environment is always 100%. That's clear. So the yields go up and the capacity goes up. And capacity, 30% up is not little. It is quite some -- a number. In Hapag-Lloyd, you'll see more or less a flat development because we didn't add capacity and we have more dry docks. So that is something where the new capacity on the expedition that kick in next year and not this year, but I can reassure you it is a very positive market as well.So Holiday Experiences, Destination Services, turnover up 23%. EBITA underlying at constant currency, I would say flat. There is also a change as we now treat it separately. Some of our Destination Services were treated as cost center in the past. Some of them were treated as profit centers. Now everything is digital, everything is the same and so on, therefore, we have a little bit of phasing differences here. I want to reassure you, this year will be up 15% in EBITA, so it is a strong growth driver. Now when you look at the markets, you see very strong development in customer numbers. Every market, every region increased their respective customer numbers, so we are taking market share. Unaided awareness, after the rebrand, very strong, I think particularly in the U.K., you can see now 44% performance after rebrand. Very strong online traffic, intact; online distribution, intact; direct distribution, intact, when you look to the lower boxes. So I would say that ticks all the boxes and is quite good.And you see here in the lower box, right box, Central Region up EUR 16 million. I always said we are looking for turnaround in that area. And it is, I would have said, 3 to 5 years. Now we don't have the 5 years yet. We have -- we're on the third year, but you see some initial good indications, and I think that's promising.Now before I hand over to Horst, on the trading, I think the trading is all good. We have new openings for Hotels & Resorts, 7 of which in summer '18. We have new ships for Cruises also for -- not only for next season, but for the season thereafter. Destination Services, we will be opening. That is one of the first investments, a Jamaican DMC in April. And then sales and marketing, I mean, winter has been revenue up 6%, bookings up 3%. In summer, we are revenue up 8% and bookings up 6%. I mean, it looks all very promising. Turkey is coming back, in some of our markets, more than 50%. So first, the volume builds right now, of course, then the yield systems kick in, so we are very confident that we will be able to deliver on guidance. And I would like to hand over to Horst for the finance.

[Horst Baier, CFO & Member of Executive Board]

Thank you very much. Good morning, ladies and gentlemen. I would like to go quickly through the P&L. Fritz alluded to the positive development as far as underlying EBITA is concerned. Adjustments are roughly double the size as in the first quarter last year. However, that is a little bit phasing. We have included here some restructuring expenses for France and for Germany. Ultimately, we stick to our guidance of EUR 80 million. And as you know, adjustments include the purchase price effects as well.Net interest down, EUR 27 million, by EUR 6 million. And the decrease is especially driven by our improved net debt position and the somewhat higher interest income. That brings me to the income taxes, 20% underlying effective tax rate. You are always already familiar with that one. Finally, minority interest sitting at minus EUR 40.9 million. This represents the positive development of [ Riu sale ] #2, which is the Riu company which we are fully consolidating. And therefore, group result after minorities sits at minus EUR 99.6 million, which is an improvement over the first quarter in fiscal year '17. And you can see that from the development of the basic EPS as well, which improved by EUR 0.02.That brings me to the cash flow statement and the movement in net debt. As far as working capital is concerned, it's slightly worse compared to the first quarter in fiscal year '17. To a certain extent, we see the reversal of some positive impact, which I have already guided on as we announced our full year financials in December '17. So no special impact here, except from this reversal of some positive impact as per 30th of September.Other cash effects are minus EUR 56 million. Last year, we had a positive development. Within this minus EUR 56 million, you have the settlement effects from derivatives and you have some cash outflows, which are due to the fact that we had to pay out some stuff which we provided for.At equity income, normal development, EUR 45 million correction here. Not too much dividends received from joint ventures and associates. Tax paid, somewhat higher compared to last year, however, normal development. And as far as the interest cash is concerned, we see some phasing as well. Pension contribution reduced because we needed to fund less money to the German pension fund, which gives us an operating cash flow of minus EUR 1.3 billion roughly. Net CapEx, in line with that what we expect for the full year. As far as net investments are concerned, positive. This includes the disposal proceeds of the 3 Riu hotels, which Fritz alluded already to. And our net predelivery payments are as scheduled. You know that we are re-fleeting our airline going to the 737 MAX. Free cash flow ultimately at minus EUR 1.49 billion, same amount compared to the first quarter in fiscal year '17.When you then move to the right-hand side of the chart, you see the development of the closing net debt as per balance sheet. We have a net financial debt position of EUR 874 million, which is an improvement over the 31st of December 2016, of roughly EUR 600 million, so a very positive development from my point of view. However, I have to mention at that point that we see some impact here from our disposals from our prefunding as far as our transformation is concerned.Moving on to an update on our Cruise fleet investment program. You have seen that we have decided, based on a very strong market development and on a strong demand, to make use of the opportunity to order another ship within TUI Cruises, which is supposed to get delivered in 2023. This is a ship which will carry 2,900 passengers roughly. Acquisition cost will be around EUR 650 million. And you are quite familiar with the contribution of such a ship, which sits between EUR 25 million and EUR 30 million. We are absolutely positive, based on the development of demand and on the German-speaking markets, that this ship will be a success, as we have seen it with all the other ships. And occupancy and development of average daily rates proves that we are here on a pretty stable track. So ship #7 is under way. As far as Marella Cruises is concerned, we stay on track with our re-fleeting, so the U.K. cruise fleet is getting modernized, and that pays out when it comes to ADR. And occupancy is fantastic, as Fritz has explained. As far as the financial needs are concerned, this additional CapEx within TUI Cruises does not mean additional funding from TUI AG. So we are here in this ring-fenced model, which is working perfectly fine.That brings me to an update as far as our reinvestment program, our transformation is concerned. You are already familiar with this chart because I believe we are showing it now every quarter. Since 30th of September, we have spent some additional money. That is due to the fact that we have added 7 additional hotels, so you can see that we have increased the cash-out for hotels. And now we still have a prefunding sitting within our cash position, which is at EUR 840 million. We are pretty much on track as far as our transformation is concerned, so there is kind of a pipeline for additional hotels, which will come into our portfolio. And we are fine as far as our plans in respect of Mein Schiff 1 and 2 are concerned. So ultimately, there is a remaining contingency of roughly EUR 100 million available to us.That brings me to the next slide, which gives an update on TUI airlines. I already touched base on the fact that we are re-fleeting our TUI airlines. We are moving from the 737 NG generation to the 737 MAX generation. We got the first 737 MAX delivered a couple of days ago to our Belgian fleet. In total, there will be 70 aircraft, which will ultimately replace all of the former 757s and the 737 NGs, which is quite good because these aircraft are very fuel-efficient, and they are efficient as far as the emissions of CO2 is concerned. And on top of that, they have an increased flying range, which is good when it comes to destinations like Cape Verde, which are pretty important to us.As far as aircraft financing is concerned, we will decide upon that on a case-by-case basis. So as far as our balance sheet strength is concerned, we can go for operating leases, finance leases or we can even go for ownership because the financing costs even for ownership are pretty attractive to us due to the good development of the company over time. That will not have an impact on our leverage ratio target range, which will stay between 3 to 2.25x, as indicated in our guidance. And that brings me ultimately to the last part of my presentation, the fiscal year '18 guidance. You are familiar with the 3% growth as far as sales are concerned. That does not include cost inflation, so it's kind of a volume growth indication. Underlying EBITA, I know that you have all the different elements within your models. And on that basis, you probably understand that we will deliver at least 10% growth as far as fiscal year '18 is concerned based on all these elements, which are in the pipeline from our transformation and, to a certain extent, based on the nonrecurring effects of fiscal year '17. Adjustments, as already alluded to, EUR 80 million. Net interest expense, EUR 120 million. Underlying effective tax rate, 20%. We stick to our guidance as far as net CapEx and investments are concerned. Net debt/cash, slightly negative. Leverage ratio, I just made a couple of remarks to. And interest cover stays within the same range as we have indicated it to you in December 2017. As far as our dividend per share is concerned, we would continue with the policy which we have applied over the last year as we grow our dividend in line with the growth of underlying EBITA.So far from my end, and now I would like to pass back to Fritz. Thank you very much.

[Friedrich Joussen, Chairman of Executive Board & CEO]

Horst, thank you. So turning the page, I think -- and doing some closing and summary remarks. I mean, when you look at our business, and I think the next page shows quite nicely how we look at it, Holiday Experiences now 60%. This includes -- or 59%, almost 60%. This includes now also Destination Services. So it is actually Hotels, Cruises and Destination Services. And we talk about a double diversification. We are active in more markets, and we are active in more destination. And that adds resilience and adds actually risk -- natural risk hedge, if you like, in our business. And you see despite the fact that things come up, and we have hurricanes and so on and so on, we deliver the underlying at least 10%, and that picture, I think, shows it quite nicely.On the next page, you'll see last years, we had averaged profitability increases of -- average was 12%, and we promised for the next 3 years 10%, at least the 10%. And it's driven by investments and increasing -- and this is the dark-blue part, increasingly by digitalization benefits. And when I talk digitalization, I don't talk so much about digital sales. I don't talk about that we have a good web presence to sell to customers. And in Sweden, we are more than 90% digital; and in U.K., let's say, 65%; and in Germany, 20%. We need to be rather customized. But that's not the point. The point is we have 2 big digital platforms, one is 20 million customers, cloud-based customers, CRM selling services throughout the value chain. And that, of course, we single out in our Destination Services as one important ingredient in that equation. And also, our full offer digitized on the Blockchain basis and 100 million bednights and 5 billion purchasing volume available globally in a kind of, let's say, touristic Blockchain environment. These are the 2 mega platforms which actually will drive profitability as well. And let's assume for a moment, we do the -- at least 10% for the next 3 years, then you will have seen over 6 years a company which doubled profitability without any additional capital raised. So quite to the contrary, we paid a significant dividend, so how many companies [ have it ], and therefore, we believe the investment story into our share is a very good and very solid and sustainable one. And the last thing I want to say before we open for question is that we will have some additional information for you, and I hope you have penciled this into your calendars. On the 9th of May, we do a Capital Markets Day, this time focused on Cruises. And guess what? It's on one of our cruise ships, so it is a good occasion that you also see one of our products. And hopefully, you are as excited about the product as I am. And then, of course, I want to highlight already, from the 13th of December, the update of our annual performance, including an update of IFRS 16. So I think that actually gives you some additional information and hopefully illustrates more about the business. And you'll know afterwards more about the business than you know already today. So thank you very much for listening in, and now we are available for your questions.

[Operator]

[Operator Instructions] And our first question comes from James Ainley calling from Citi.

[James Robert Garforth Ainley, Director and European Hotels and Leisure Analyst]

So I've got 3 questions, please. Firstly, I'm interested to hear about how hotel rates are evolving in the summer, especially in Spain, as the demand for the Eastern Med improves? Secondly, if you could give us some -- maybe some more color about the U.K. demand and U.K. consumer confidence, particularly if there any changing patterns around maybe duration or destination mix as perhaps [ TUI ] gets more squeezed? And then thirdly, if you can comment on German market with respect to the Air Berlin bankruptcy, how you're seeing that market evolve, particularly if there's some improved [ good ] demand there?

[Friedrich Joussen, Chairman of Executive Board & CEO]

Okay, James. Yes, hotel rates. Hotel -- demand is coming back in Turkey. And surprisingly, rates are still up in Spain. So it seems to be that it's so elastic. We see now more and more good source market mix in Spain. So I would say, generally, I would assume that the Spanish rates and Spanish margin, particularly in our hotels, seem to be very stable. U.K. demand, we will -- in December, you saw a little bit of weakening margins. And that was the reason -- the reason was, of course, because the pound was 20% diluted. And [ the cost ] in euro and dollar, it was difficult to recuperate all the margin pressure. Now that said, in the winter and also next summer, you could have 2 hypotheses, and it's interesting to see which one is the right one. The first one could say, the first hypothesis is, there is a little bit of weakening demand or, let's say, still many customers go. We are talking not weakening demand, we are talking weakening margins, right? So it's a little bit of weakening margins, to be precise, and because customers see the higher price level and, therefore, the higher price level changes patterns. The other [ hypothesis ] could be, it's not the price level itself, it is the increase of the price level which drives the change. And the first time we can really judge about that is December or, let's say, the winter sales for '18, '19, because then, there is not a change from '17, '18 to '18, '19, then it's the absolute level. And guess what? We have now opened the season. It's very, very early days, but it seems to be that winter will be very strong. And -- so next winter will be very strong. So it seems to be that it was more the change in price level than the price level itself. Now that said, it's very early days, but I would assume that the demand is very resilient, and we are planning for that. German market, last. In winter, we have been a beneficiary of shortening of supply. We also built actually additional capacity, as you know. We took the wet lease of Air Berlin back, 7 of which we put into Eurowings as wet leases. We took another 4 aeroplanes, but of course, we retired 2, so the net-up figure was 2. And we also acquired some slots in a slot-constrained Düsseldorf Airport, so we believe we will be somehow a beneficiary. And at least for the winter, you have seen the up 16. And also summer, trading is very good. So I think we will be fine, but the proof is in the pudding. We will see. So -- but we are confident.

[Operator]

And our next question comes from Mr. Tim Ramskill, who is calling from Crédit Suisse.

[Tim Ramskill, Research Analyst]

I've got 3 questions as well, please. Maybe, Horst, if you could just spend a little bit more time running us through the thought process around the airline fleet and the potential for sort of owning more aircraft on the balance sheet. Just maybe some sense as to the cost -- overall cost benefit and perhaps accretion you could expect to earnings from a shift in that direction. And the second question was just around your Cruise growth plans. Obviously, you've had a period of very rapid additions to the fleet up to 2019. And then there's going to be quite a meaningful gap until this new ship in 2023. I just wanted to understand kind of why that situation has arisen, and how you might plan to sort of shift ships between the German and the U.K. business, and if you think there's going to be a period of much better pricing if you have a period where you're adding less capacity. And then my final question was just around the central region. Fritz, you observed that you felt you could sort of see some early signs of improvement in the region. My interpretation of Q1 was that it was very much driven by the nonrepeat of the one-off TUIfly costs last year. And therefore, there wasn't really much obvious sign of improvement to me. So can you just help us understand the things we should be looking for in terms of profit and margin improvement in Central Europe, please?

[Friedrich Joussen, Chairman of Executive Board & CEO]

Yes. Horst, why don't you take the [ ownership ]?

[Horst Baier, CFO & Member of Executive Board]

As far as the re-fleeting is concerned, we have improved as a company. As far as our rating is concerned, we are BB flat. However, in discussions with banks and then with investors, that comes -- the message to us, we perceive you already stronger, we rather perceive you as a BB+ something. 2 weeks ago, I was in Japan, which we are doing every year to have a road show in Tokyo for our financing houses as far as [ joint growth, Visa ] finance leaders are concerned, and appetite for aircraft from TUI is very strong. People are saying to us, you have improved, as far as your results are concerned, you are disciplined. And so we rather would like, in the special-purpose vehicles, 2 aircraft than 1 aircraft. And in this situation, combined with the development of interest rates, is kind of a unique opportunity from my point of view to adjust the philosophy which we have had over a couple of years. As far as aircraft ownership was concerned, we typically operate leased aircraft in the past. Now we are in a different place, obviously. And combined with this very favorable market environment, we are looking into how to finance aircraft on a case-by-case basis. And we will certainly update you whenever new deliveries will come through. We are already fine as far as our complete '18 deliveries are concerned, the 16 deliveries more to come in '19. And at the time being, this is kind of the task which our finance guys have to deliver the best financing model for each of these aircraft which will join the fleet in fiscal year '19.Yes, that is to the part as far as the aircraft financing is concerned. Second question was on cruise ship plans, would you like to...

[Friedrich Joussen, Chairman of Executive Board & CEO]

Yes, I mean it's an open secret that if you could buy more ships and we could put in service more ships, we would do so. I mean we -- in last year as -- and also last quarter, we increased capacity dramatically, yes, and still can increase yields. I mean that is a very beautiful environment. The capital returns, by the way, of cruising today is 20%. And if you think about that you still have an increase in capacity, meaning you have investment in related costs without the related revenues and results. It's very clear that according to plan the ROIC will even increase in the next years. Now that said, we still have some goals to come. And the new Mein Schiff 1 and the new Mein Schiff 2, and we talked about Mein Schiff 7, now, you know, will come. And we potentially will redeploy the old Mein Schiff 1 and the old Mein Schiff 2 into the U.K., because also, Marella Cruise is very strong. If there was more capacity available, and we are constantly looking and stuff, maybe we can even do more, because there is a lot of cruise capacity, not new, but older cruise capacity. And we have also experience of how to run older cruise capacity once it's refurbished very profitably. But that's not that easy. If it was so easy, by the way, I think we would see other returns. The returns would be lower. So therefore, it is a little bit -- the growth is a little bit restricted, is a good -- is a bad message, at the same time, it's a very good message. And that's how I see it. On the Central -- I mean, you can -- of course, TUIfly didn't reoccur. But I can also tell you, a bankruptcy of an airline like Niki or Air Berlin has a lot of collateral damage also in the last quarter. I mean think about the regrouping, rebooking, just we had to do because of the new insolvency. What we actually, only have put in right now, the EUR 20 million as a one-off effect is actually the flying we did for Air Berlin and which it didn't pay out, last year, and they didn't pay us right now, and therefore, we had actually to eliminate or actually show the losses right now. Operational damage is actually not part of the EUR 20 million which we have shown. And I can tell you, more customers, higher margin in Germany in Q1. And therefore, I'm bullish that we are on the right track. And also, the first time I see that more online. And we are talking about, let's say, an increase -- of course, on a small base, as you know, it's only 20%. But we are talking about now, 20%, 30% higher online share in Q1, which is -- I don't say the turnaround is there, is all great and so on. I only say, contrary to last year, I see now a new spirit, and I see now the first things happening, and therefore, I'm more bullish on Germany than I have been half a year ago.

[Tim Ramskill, Research Analyst]

Excellent. Can I just follow-up with one very quick one on the Cruise side of things? In terms of the pricing outlook longer term, would you see an environment where you have less capacity growth as beneficial for pricing? Or is it the case that new ships where you tend to get a premium price are part of the reason why you've enjoyed an increase in yield? How do those 2 things play out, please?

[Friedrich Joussen, Chairman of Executive Board & CEO]

Both are true -- they both are true. Newer ships create a premium. At the same time, when you extend your fleet, you have another effect, and that is actually you also extend your routing. And you usually extend your routing into routes which are not as attractive than the routes you had before, because with [ respect to ] capacity, you do the most profitable routes, first, and then you go at lower profitable routes, but the diversity of routes is very important to customers as well. So you have 2 effects, newer ship, higher yields; more routes, lower yields. In general, I would say, the fundamentals of economy, if you have more demand than supply, actually creates a very healthy environment. And all kind of marketing,[ Google go about ] older ships and newer ships and better routes and lower routes, I mean at the end of the day, it's all fundamentals. And we know that the supply will be reflective for the next 5 to 7 years.

[Operator]

And our next question comes from Mr. Patrick Coffey, who is calling from Barclays.

[Patrick Coffey, Director]

Just 2 question for me. Firstly, on the U.K. and talking about margin normalization. Can you just clarify how much extra investment is required in U.K. marketing this year in total? Clearly, you've previously flagged that you're going to see normalization of U.K. margins. But looking back to my old TUI Travel models, you saw margins were at sort of 5% to 7% between 2012 to 2014. But at the time, this included Thomson Cruises. Can you -- so can you just kind of help us understand what a normalized U.K. margin actually is? And then the second question, hopefully a quick one. Should we be expecting any further restatements or changes to the reporting structure?

[Friedrich Joussen, Chairman of Executive Board & CEO]

Okay. Answer to the first one, 5 -- and 5%. And answer to the second one, restatement, no.

[Operator]

And our next question comes from Tobias Sittig, who is calling from MainFirst Bank.

[Tobias Sittig]

3 questions from me, please. Firstly, the restructuring in France. Could you elaborate a little bit on what you're doing? How much that could reduce costs? And basically, your level of confidence that France will finally breakeven or deliver a decent margin this year or next year. Second one, your relative cost division, both for TUIfly and Corsair, with the things you've been doing? How do you look at that? Do you think they now have a sustainable cost structure that allows you to compete profitably in the market longer term? Or what do you need to do to get there? And thirdly, the rebranding in the U.K., could you give us a number on how much you spent maybe in relative to normal marketing budget this year on marketing in the U.K. to give us a feel on how much has been spent on the rebrandings though?

[Friedrich Joussen, Chairman of Executive Board & CEO]

Okay. France is -- the restructuring is going well. I mean the integration of Transat and TUI France is going well. Now that said, we had some influences of hurricanes in Caribbean, and so on and so on, but the sustainable hypotheses of France is intact. Second point was -- and by the way, we are targeting, as we said, for this year a breakeven, yes. So let's see where it takes us. You know the season is long. And -- but I said, it's intact. There is no reason to assume that we will not achieve it. Now the other one on Corsair is, of course, now the question of -- we are definitely a small player, and we always have said we are looking at all alternatives. Now that said, we have used the low oil price to hatch quite some bit for the future. As you know, we are running old aircraft, and that is not playing positive. But it's also clear that we are -- it's not part of our TUI operating model. It is a separate company. Of course, we will not do stupid things, but we are potentially not the best owner for that asset. But that said, we also need to find a buyer and then the [ quota ] must be there. And also, our people need to accept it. I mean we don't want to do something that our people cannot accept the solution, so we are also clear about that. But strategically, it's not part of our offering. And the last one...

[Horst Baier, CFO & Member of Executive Board]

Rebranding.

[Friedrich Joussen, Chairman of Executive Board & CEO]

The rebranding. Rebranding in U.K., We don't separate out the cost. I mean, we -- or do we separate out the cost?

[Horst Baier, CFO & Member of Executive Board]

No.

[Friedrich Joussen, Chairman of Executive Board & CEO]

No, we don't. I just was looking to my financial colleague, it's an all-inclusive offer. No. But I can reassure you that we -- in all the rebrandings in all the countries, we earned back the rebranding costs within a year. And I can reassure you, what I know right now from the U.K., we will earn back the rebranding of the U.K. within a year. I mean we are up now on unaided awareness of 44%. Our online traffic is up versus year-on-year. That is the main point, right? So the main point is not physical rebranding. The main point is actually how much online bookings do you lose, and that is actually unaided awareness. It's the first gate. Second, you need to [ find to ] our web page search, you need to convert web page traffic into orders. And the funnel is fully intact. In all instances, we are better than last year. And you could argue, it's a rebranding. You could argue, it's actually the commercial pressure we put because we have more money in the ads. You could argue Monarch insolvency plays a certain role, I don't -- but at the end of the day, I don't care as long as the numbers are what they are.

[Operator]

Our next question comes from Angus Tweedie, who is calling from Bank of America.

[Angus Vere Tweedie, Vice President]

2 questions from me. Firstly, on hotel occupancy. Can you just talk about the trends there? Because you're down at the sort of 3 major brands, but up overall. I mean, is there signs of Turkey coming back? And could you talk about that? And then secondly, on Destination Services, I think I got it on the call, you were talking about 15% growth there, this year, in terms of profits. Could you just help us understand, perhaps the operational leverage there, and how we should think about that business?

[Friedrich Joussen, Chairman of Executive Board & CEO]

Occupancy, yes, it's true. It's mainly driven by actually North Africa and Turkey coming back.

[Horst Baier, CFO & Member of Executive Board]

It's a little bit Tunisia, which is in the -- Egypt is on there. It is not yet Turkey because Turkey only starts in April. But it is all running pretty positively.

[Friedrich Joussen, Chairman of Executive Board & CEO]

And on Destination Services, I think what we show is we show revenues, only external revenues, yes? Of course, external revenues will generate margin, so you can actually not divide that margin by revenues. I think when you look at the gearing of the business, we are talking 10% or so, right? I look to my colleagues here.

[Horst Baier, CFO & Member of Executive Board]

Yes.

[Friedrich Joussen, Chairman of Executive Board & CEO]

What is that? I cannot [ read ]. 8%? It says. It's more around a little bit above 8% than 10%. I mean at the end of the day, we are very early days. We've separated out the business. We have actually delayered the business. We have actually now fully digitized the business, so it's all in the cloud, yes? And now actually we are converging it. There are still -- part of the restructuring still takes place. We have now also the employment model, for example, for our employees this changed to [ always this ] model now, and so on and so on. So there's so many changes right now. And the fundamental belief is, there is a sustainable differentiation versus all other players. And that is, we can say to customers before customers are in destination, and that is, we believe, such a great advantage because can you imagine, when you book a segway tour and you are in front of blackboard of a hotel or if you book the segway tour when you are sitting -- before you travel, you're sitting on your couch at home? I mean this is such a difference. So don't read the small numbers right now. Think about the bigger picture a year from now.

[Operator]

Next up is Mark Fortescue, who is calling from Panmure.

[Mark Paul Irvine-Fortescue]

Just 2 from me, please. One on Hotels & Resorts, one on sales and marketing. Slide 10 for Hotels & Resorts was just a touch on the profit bridge. If you are taking out the disposal's profit there, it looks like the profit progress is pretty flat. And you've got 7 new openings in there. Is that mostly just a timing issue as to when those came into the business in the quarter? Just maybe a bit of context around what's coming in and what's leaving, given what looks like a relatively flat like-for-like profit performance.

[Friedrich Joussen, Chairman of Executive Board & CEO]

And the second question?

[Mark Paul Irvine-Fortescue]

Is on sales and marketing, just coming back to the point around the U.K. So you've talked about margins and the rebrand, just to sort of square those 2 points. The summer bookings are down 1% year-on-year. Is that broadly where you thought you'd be, given the efforts around the TUI rebrand? Just to touch on that, please.

[Friedrich Joussen, Chairman of Executive Board & CEO]

Yes. Horst, maybe take the second question because I'm not 100% sure I understand.

[Horst Baier, CFO & Member of Executive Board]

Yes. Maybe I'll start with the Hotels, where you flexed out the disposal gain. And then said, this is only a EUR 3 million up or EUR 4 million up compared to the fiscal year 1. First part on '17, we are in the very low season. We have October through December, not too much activity, and November and December is at Christmas. So you cannot expect a big uplift. Even though we have added 7 hotels in that quarter, you cannot expect that these hotels are delivering from day 1, 80% occupancy and are fully onstream. It's always kind of a build which you'll need. We will see this increase as far as hotels are concerned result-wise over the next quarter -- quarters which are ahead of us.

[Friedrich Joussen, Chairman of Executive Board & CEO]

And also, more capacity drives usually higher losses. And I mean, also these hotels, you have a certain seasonality. Therefore, I think -- look at -- we will have a strong growth for the whole year, that's very clear. I mean when you look at the bookings for the full year, we have the visibility. It will be quite nice. The bookings for summer, we have higher margins, but we also could have higher bookings, that was the reason why I'm not 100% sure for the U.K.

[Horst Baier, CFO & Member of Executive Board]

I think we haven't got the question exactly, what you raised in respect of sales and marketing.

[Mark Paul Irvine-Fortescue]

Well, just given the campaign around the TUI rebrand in the U.K., I might have thought the summer bookings would be a bit stronger, but you're saying they're down 1% compared to where they were last year.

[Friedrich Joussen, Chairman of Executive Board & CEO]

Okay. Yes, I think when you look at -- but the selling prices are up 3. I think my view on this is, we are playing for the time being, the price margin equation that doesn't say anything about -- our capacity is up, yes. Therefore, it will be more customers in summer, and we will be taking market share, because we also have our competitor less. I mean that's also clear. Monarch actually exited, and by end of season, we will be fine. Now the -- of course, for the time being, it is more the price margin accretion we are playing, but we shouldn't be too -- worried too much.

[Operator]

Our next question comes from Richard Clarke, who is calling from Bernstein.

[Richard J. Clarke, Research Analyst]

3 questions from me, if I may, all actually on the hotels. First one's just on the Riu disposals. Can you maybe just tell us what you've sold, why you sold it? And if there's any sort of signaling there that this is part of a wider strategy of asset rotation? And then you haven't included the EUR 85 million proceeds in your CapEx bridge on Slide 19. Any reason why and what that money might be used for? And then the third question is on the other hotels. Last year, you made, I think, about EUR 60 million loss in the other hotels. Most of those are in, I think, Turkey and Egypt and Tunisia, you've seen the occupancy come up, as Angus correctly pointed out. But the loss seems to have widened a little bit in Q1. What are your expectations for the full year in those other hotels' profitability?

[Friedrich Joussen, Chairman of Executive Board & CEO]

I think the hotels we are talking about are the Riu Romantica, [ Bachata ] and Merengue, both -- all of them are actually -- should have been refurbished. They have not been very profitable. Therefore, we said these are not the hotels we want to own long term. And on the Turkey -- and on the other hotels, it will be Turkey, which actually will turn around the whole thing or not. I mean that's also clear, Turkey is much bigger as a destination than all the other destinations. But the bookings are up in Turkey 50%. So we have decided -- we talked about it, we have decided to extend leases in Turkey last -- just 6 months ago for the next seasons. Of course, at better rates and better conditions. But we believe Turkey will be a good value contributor. On the CapEx, Horst, I'm not sure.

[Horst Baier, CFO & Member of Executive Board]

Yes. It's Chart 19 which you referred to. It's illustrating our transformational process. So what we have done, we sold these 3 so-called noncore assets. And then when you go down to the right-hand side, you see all the different elements where we spent the money. As far as the disposal proceeds from the 3 Riu hotels are concerned, these are part of our overall CapEx guidance. So it's sitting within the EUR 1.2 billion, which I have alluded to as far as our overall CapEx forecast for fiscal year '18 is concerned.

[Richard J. Clarke, Research Analyst]

Okay. And then maybe just on the -- whether these disposals are -- are these a signal that you are looking to do more kind of asset recycling going forward? Or were these 3 one-off hotels that you wanted to dispose of?

[Horst Baier, CFO & Member of Executive Board]

We are reviewing our portfolio of hotels on a regular basis, and we regard it as a very operational exercise when you have such a portfolio of hotels that you're looking to, the ones who may result in a very high disposal price compared to that what you can get as an operational result from this hotel. So it is again kind of a very rational approach as far as the portfolio of hotels is concerned.

[Operator]

And our last question today comes from Jeffrey Harwood, who is calling from Stifel.

[Jeffrey Harwood, Analyst]

Just one question left. The line, all other segments, the loss there has moved from EUR 11 million to EUR 23 million. I wondered if you could say what's happening there, please.

[Friedrich Joussen, Chairman of Executive Board & CEO]

That is actually the Corsair D check's EUR 8 million.

[Jeffrey Harwood, Analyst]

I'm sorry. it's EUR 8 million from...

[Friedrich Joussen, Chairman of Executive Board & CEO]

Corsair D checks. So we [ cause it to ] go into D checks. This is more or less explaining the effect. Okay. Thank you very much. All the best from Hannover and see you latest on our ship.

[Horst Baier, CFO & Member of Executive Board]

In May.

[Friedrich Joussen, Chairman of Executive Board & CEO]

In May. Thank you very much. Have a great day.