Hotel creditors play hardball with TUI

PHUKET, 15 May 2020: Twelve hotel associations in southern Thailand have rejected TUI’s proposed debt repayment schedule while submitting a letter to TUI CEO Friedrich Joussen that outlines a counter-proposal.

Last week, around 100 hotels contracted by TUI AG for holiday accommodation in 2019 and 2020 confirmed TUI was renegotiating credit terms and linking it to hotels signing new contracts. 

Hotel partners in Thailand claimed they were owed around THB2 billion mainly for TUI’s holiday bookings in South Thailand at popular resorts such as Phuket island, Krabi, Khao Lak, Phang Nga, Samui and Phangan islands, as well as resorts along the Andaman Sea coast.

In its proposal, TUI offered to settle debts with its hotel partners in Thailand according to an instalment plan as follows:

  • 25% within 10 working days after signing an amendment agreement
  • 25% within 10 working days after TUI ́s operations from the source markets to the destination resumed
  • 25% within one month after reinstatement
  • 25% within three months after reinstatement.

There were some variations on the basic instalment plans for specific resort partners. But the hotel associations representing the majority of hotels available across southern Thailand’s premier beach destinations rejected the offer. A few resorts may have agreed to TUI’s proposed rescheduling of debt payments, but the majority appear to have stood by the trade associations’ counter offer.

In their reply that was seen by TTR Weekly, the associations presented a counteroffer to the TUI CEO who is based at the global company’s head office in Hanover Germany.

“As your creditors, we would like to propose to you a deferment payment plan, as follows:

  • 50% of the overdue amount of the total debt required to be settled by 29 May 2020;
  • 50% balance is required to be settled by 29 October 2020,”

All the 12 presidents signed the letter and attached their official association logos.

The associations stated: “Please understand that your company has already consumed our accommodation services before the Coronavirus outbreak and now, you are insisting on holding back funds.

“These punishing and unfortunate payment delays of between 30 to 150 days have caused hoteliers not to be able to fully support staff, creating incredible and long-term damages, all the while there are no incoming earnings at all since the end of March 2020 up until now.”

The associations added: “(Our) solution would help you to clear your debt and also it would help Thai hoteliers to survive in order to get a good, strong and positive start for the upcoming winter season.”

TUI’s financial exposure in Thailand extends beyond hotels. A reliable travel trade source suggested payments would also be due for services provided by the Airports of Thailand, AeroThai an agency in charge of air navigation and overflight fees, ground handling and airline catering services.

A shipping agency was assigned to supply logistics at U-Tapao seaport specifically to assist a TUI cruise ship that was stranded during the Covid-19 crisis in April. The services involved land transfers by bus to Bangkok’s Suvarnabhumi airport to connect with repatriation flights.  All services provided by the state-owned corporations, such as AoT and AeroThai, would be covered by bank guarantees, but some services offered by non-state enterprises would come with commercial credit terms unsecured by bank guarantees.

TUI has a stake in tour operations in Thailand through the registered travel company, Destination Services. The joint venture with the German tour operator is responsible for tours and transfers in Thailand, booked by TUI AG and subsidiary travel brands. However, in Southeast Asia, other travel firms are responsible for tour and transfers under separate conditions and credit terms.

TUI is arguably the world’s largest tour company with a chain of retail travel agencies, online booking agencies an airline, hotels and a cruise line.

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