TUI Group Investor Presentation March 2019 What is TUI Group? Hotel & Resorts, Cruises and Destination Experiences holiday experiences “product” provider with own distribution and fulfilment KEY HIGHLIGHTS HOLIDAY EXPERIENCES €426m Leading leisure hotel and club brands around 27m customers (1) EBITA the world; investments, operations, ownership €324m €19.5bn revenues EBITA Leading German & UK cruise brands €45m (2) Tours, activities and service provider in €1.15bn EBITA EBITA destination % 23.0% ROIC MARKETS & AIRLINES % 10.9% (3) earnings growth €453m Market leaders in packaged distribution, fulfilment, EBITA strong market and customer knowledge 1 21m Markets & Airlines plus further 2m from Cruise and from our strategic joint ventures in Canada and Russia totals 23m; in addition 4m from customers direct and via 3rd party channels to our Hotels & Resorts and Cruise brands 2 Underlying; 3 According to company guidance earnings growth is at constant currency 2 TUI GROUP | Investor Presentation | March 2019 Market environment: TUI has moved on and developed into an integrated provider of Holiday Experiences OTAs “Best and unique product, “Depth of offering“ individualised offering“ • Agent model, trading margin • Dynamic packaging • No/ limited risk capacity • Own hotels, flights and cruises: • Increasingly dynamic packaging ̶ Yielding of risk capacities ̶ Own distribution & fulfillment Tour operators ̶ Double diversification “Packaged holidays“ • Packaging of hotel & flight, fulfillment Airlines • Trading margin leveraged by “Ancillary packages“ ̶ Flight risk capacity • Airline as core business ̶ Hotel commitments1 • Packages as add-on and to de-risk flight capacity • Trading margin on hotels • Increasingly direct hotel sourcing Potential new entrants • Global tech companies 1 Prepayments and volume guarantees 3 TUI GROUP | Investor Presentation | March 2019 Our business model: Product-focused holiday provider with almost 70% Holiday Experience earnings Markets & Airlines – ~30% EBITA HOLIDAY EXPERIENCES – ~70% EBITA INTEGRATION BENEFITS Rest Own & Committed Digitalisation, efficiency, diversification 23m customers1 Growth, diversification 4m customers2 • Own customer end-to-end: personalised offerings ~150 TUI Aircraft, 3803 • Yielding our risk capacity: 27m Owned / managed / JV 3rd party flying Hotels Integrated ROIC FY18: 14% 3rd party customers to optimise own hotels/ distribution distribution cruises demand Own, 3rd party • Unique TUI experiences and 164 committed & Owned / JV Ships fulfillment differentiating TUI from non-committed Integrated ROIC FY18: 23% 3rd party competition, customer satisfaction distribution distribution • Double diversification across Customer, Markets & Airlines and Holiday 115 knowledge, service Owned / JV Experiences mitigates localised & fulfilment Destinations Integrated ROIC FY18: 26% 3rd party external shocks distribution distribution 5 ROIC FY18: 80% More than 70% of profits from GROUP PLATFORMS own and committed differentiated risk capacity 1 21m Markets & Airlines customers plus a further 2m for Cruise and from our strategic joint ventures in Canada and Russia totals 23m 2 4m customers direct and via 3rd party channels to our Hotels & Resort and Cruise brands 3 This number includes group hotels and 3rd party concept hotels as at end of FY18 4 As at end of FY18 5 This number relates to Markets & Airlines and All other segments 4 TUI GROUP | Investor Presentation | March 2019 What does it mean? Integrated model brings strong strategic benefits in the wider market context INTEGRATION BENEFITS / TUI STRATEGY WIDER MARKET CONTEXT Own customer end-to-end Enables us to personalise our customers’ holiday experiences, basis for targeted marketing Yielding our own risk capacity: 27m customers to Reduces reliance on third party distribution and allows optimise own hotels / cruises demand yielding of our products Unique TUI holiday experiences and fulfilment Differentiates us from the OTAs, other pure-play differentiating TUI from competition distributors and the airlines, drives customer satisfaction and retention Double diversification across Markets & Airlines and Diversified across source markets and destinations - Holiday Experiences helps to mitigate the impact of cyclicality in individual markets and geopolitical shocks 5 TUI GROUP | Investor Presentation | March 2019 What do we offer to our investors – 3 reasons to be invested are intact • Global leading tourism group • Holiday product provider with own distribution STRONG • Own customer end to end: Markets & Airlines, Hotels, Cruises, Destination Experiences STRATEGIC POSITION • Individualisation and targeted marketing • Yielding of own products • Risk mitigation by double diversification • Global leisure travel market growing above GDP STRONG EARNINGS • Strong track record driven by merger synergies: Underlying EBITA CAGR of 13%1 since merger GROWTH • Future growth supported by digitalisation benefits and by reinvesting disposal proceeds • 23% group ROIC FY18, significantly above cost of capital • Strong operating cash conversion, enabling to fund STRONG CASH GENERATION • investments • high cash returns to shareholders in form of dividends • balance sheet stability 1 Underlying EBITA CAGR of 10% since merger / average CAGR of 13% since merger at constant currency (company earnings guidance is at constant currency) 6 TUI GROUP | Investor Presentation | March 2019 GROWTH & DIGITALISATION INITIATIVES TUI GROUP | Investor Presentation | March 2019 Future earnings growth driven by reinvestment of disposal proceeds, digitalisation and efficiency benefits STRONG GROWTH TRACK RECORD: FUTURE GROWTH: HIGHLIGHTS MERGER SYNERGIES INVESTMENTS, DIGITALISATION & EFFICIENCY • 3 earnings waves, heading towards third wave • Mix of earnings growth changes +13%1 3rd wave: gradually over time Efficiency & digitalisation 2nd wave: benefits 1• Growth from investments Transformation 1st wave: investments 2 Efficiency Synergies 3 Digitalisation benefits FY14 FY15 FY16 FY17 FY18 FY19e FY20e 1 Underlying EBITA CAGR of 10% since merger / average CAGR of 13% since merger at constant currency 8 TUI GROUP | Investor Presentation | March 2019 1 Hotels & Resorts investments: 57 new hotels since merger, lower capital intensity PORTFOLIO DIVERSIFICATION DERISKED GROWTH • Predominantly lower capital intensity Berlin Croatia Bulgaria • Ownership in 365 days Dublin destinations/ where scarcity of New York Greece Portugal Ibiza Italy Turkey assets Dom Rep Cyprus Mexico Tunisia • De-risking through JV off- Barbados Egypt Tobago balance sheet financings Costa RicaJamaica St. Lucia Aruba Antiqua Cape Verde Grenada • 15% Blended ROIC hurdle Maldives Sri Lanka Thailand Zanzibar Mauritius Management, Franchise Ownership, Lease ~65% OF INVESTMENTS WITH 57 NEW HOTELS OPENED SINCE ROIC 57 HOTELS FY19e: CAPITAL DISCIPLINE LOWER CAPITAL INTENSITY1 MERGER BLENDED 15% (HURDLE) 1 Low capital intensity is defined as Management, Franchise and 50% of owned hotels due to joint venture structures 9 TUI GROUP | Investor Presentation | March 2019 1 TUI’s cruise capacity growth financed through disposal proceeds re-investment programme and off-balance sheet (JV) OFF-BALANCE SHEET FINANCING AS BRAND / OWNERSHIP FLEET DEVELOPMENT PREFERRED OPTION Off-balance sheet: JV Current fleet: Exit FY22 • Funded by JV • No CAPEX requirements for TUI Deliveries: FY23 FY24 FY26 On balance sheet • Part of TUI’s growth investment strategy Current fleet: • Funded by reinvesting disposal proceeds On balance sheet Current fleet: • Part of TUI’s growth investment strategy • Funded by reinvesting disposal proceeds Deliveries: FY19 FY20 FY21 Fleet and pipeline as at February 2019 10 TUI GROUP | Investor Presentation | March 2019 1 Strategic expansion of our Destination Experiences business – Ticking all boxes: Musement acquisition complementary to recent HBG Destination Management acquisition DIGITALISATION MORE PRODUCTS MORE GUESTS MORE DESTINATIONS • End-to-end digital process: • Differentiation of excursion • TUI package customers • More sun & beach from supplier to customer portfolio • TUI non-package customers destinations • Part of global CRM platform • Activities • 3rd party customers • City destinations • Omni-channel • Multi-day tours • Asia LAYERS • Personalisation TUI TUI DX STRATEGY • Integrated marketing campaigns ACQUISITIONS 11 TUI GROUP | Investor Presentation | March 2019 1 Strong cash generation allowing to invest, pay dividends and strengthen balance sheet BUSINESS MODEL STRENTGH CONTINUES TO DELIVER ROIC1 CAPITAL ALLOCATION FRAMEWORK HOTELS CRUISE 23% Growth investments JV growth 14% 13% • Reinvesting disposal proceeds • ~50% JV cash flow 12% 20% pay-out to TUI 11% • 15% blended ROIC TUI GROUP 17% 17% • ~50% retained to • Opportunistic M&A, Strong cash 24% finance JV growth 23% if synergistic generation FY15 FY16 FY17 FY18 22% 22% 2 FY15 FY16 FY17 FY18 allows all boxes to be DESTINATION MARKETS & AIRLINES, ticked EXPERIENCES ALL OTHER Balance sheet Attractive dividend FY15 FY16 FY17 FY18 26% stability 85% • In line with underlying EBITA 80% • Target leverage ratio growth at constant currency 50% 50% maintained at 24%42% 42% 3.0x-2.25x • FY18: €0.72 per share 2,3 3 FY17 FY18 FY15 FY16 FY17 FY18 1 Pre IFRS 16 2 Based on former segmentation - Marella Cruises within Markets & Airlines 3 Based on former segmentation - Destination Experiences within Markets & Airlines 12 TUI GROUP | Investor Presentation | March 2019 2 Efficiency - specific measures for our Markets & Airlines business and entry