TUI and HostelWorld suspend dividends to ease financial difficulty, says GlobalData

As banks worldwide cancel dividend payments, more travel-related companies are following suit to keep cash flow circulating in a bid for survival. Both TUI, the European travel giant,and HostelWorld, a hostel-focused online booking platform, are some of the latest travel intermediaries to suspend dividend payments. This is happening industry wide, with major players across hotels, airlines and technology providers following suit, says GlobalData, a leading data and analytics company.

Johanna Bonhill-Smith, Travel & Tourism Analyst at GlobalData, comments: “Periods of financial difficulty and unforeseen expenses are factors that cause a company to suspend dividend payments. TUI recently secured a US$2bn bridging loan, offered by the German development bank KfW. This action, alongside the suspension of dividends and an existing credit of US$1.9bn, puts the company in a stronger position to withstand the impact of COVID-19.”

Meanwhile, management at HostelWorld announced a financial hit of around US$5.4m due to the unprecedented challenges of COVID-19 in its most recent trading statement. This was shortly followed by the cancellation of the final dividend payment to maintain cash flow within the business; with around US$21.8m in cash reserves.

Bonhill-Smith adds: “Amid the financial difficulties and subsequent lack of demand, the major actions taken by travel intermediaries primarily relate back to cost evaluation. The suspension of dividends, major staff adjustments and urgent requests for government action are three of the most popular actions taken to mitigate the impacts of the virus so far. The suspension of dividends is one of the most recent actions that has been added to a growing list.

“As the pandemic continues to spread, global operators will continue to feel the financial strain. The suspension of dividends is likely to trend across more companies as the bid to preserve cash reserves increases in importance.”

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