TUI: its cruise and hotel joint ventures are worth the whole company, and that is the problem

In fiscal 2025 TUI Cruises paid out €440 million in dividends, and TUI's half was €220 million. The year before, the whole payout was €40 million. TUI owns half of the company that runs the Mein Schiff fleet, does not consolidate it, and does not carry its roughly €3.24 billion of net debt on its own balance sheet. At 8 times next year's earnings, TUI's joint venture stakes are worth about €3,760 million. The stock market values all of TUI at €3,339 million.

At the October 14, 2026 Xetra close of €6.58, the shares trade at 0.70 times my triangulated Base value of €9.40, an upside of 42.8%. The Bear value of €4.82 is 26.8% below the price and the Bull value of €11.90 is 80.8% above it. Confidence is grade D (12/25), the required margin of safety (MOS) is 55%, and the maximum buy price is €4.23. That price is not robust to a single input, so I state it as a band of €3.44 to €4.88. My broker showed €6.60, 0.3% above the verified close. Results for fiscal 2026, which ended on September 30, 2026, are due on December 9, 2026.

Valuation route: consumer services, an integrated leisure travel group with a 50% minority partner in its main hotel company and a 50% stake in a cruise joint venture. Classification: Standard Company (2/12). Primary method: the cash that actually reaches TUI shareholders after all investment, lease payments, interest and dividends to minority partners, with joint venture cash counted only as dividends received (60% weight). Secondary method: enterprise value to EBITDA on the consolidated business without the joint venture income, with leases in debt and the joint ventures and minorities valued separately (40%). All values are estimates of fair value today, as of October 14, 2026, not price targets for a later date. TUI's fiscal year ends on September 30, so FY27 runs from October 2026 to September 2027.

What TUI is

TUI sold holidays to 9.9 million customers in the third quarter of fiscal 2026 alone, and it owns a large part of what it sells. It reports four segments. Markets + Airline is the tour operator with its own airlines. Hotels & Resorts runs 442 hotels, including Riu through RIUSA II, a company TUI owns 50% of, plus Robinson and TUI Blue. Cruises is mostly TUI Cruises, the 50/50 joint venture behind Mein Schiff. TUI Musement sells tours and activities.

The segments earn very different money. In fiscal 2025, Hotels & Resorts made €735 million of underlying EBIT and Cruises €481 million, together €1,216 million of the €1,483 million segment total. Markets + Airline, which brought in 5.49 million of those 9.9 million third-quarter customers, made €200 million, a margin of 1.0%. The asset-heavy parts earn the profit, and the tour operator fills them.

Two details shape everything below. About a third of group EBIT is TUI's share of joint venture profit, which is not cash: €463.9 million in fiscal 2025, of which TUI Cruises was €314.0 million. And about a quarter of group profit belongs to minority shareholders, mainly the other 50% owner of RIUSA II: 24.4% in fiscal 2025.

The latest quarter

The third quarter to June 30, 2026 shows what a bad year for a tour operator looks like: fewer customers, lower hotel occupancy and two shocks that management counts as one-offs.

The pre-close update in September looked further ahead and did not get better. Booked revenue in Markets + Airline is down 5% for summer 2026 and down 7% for winter 2026/27. Hotel occupancy is 2 points lower for the fourth quarter and for the first half of fiscal 2027. Cruise capacity rises 17% in the first half of fiscal 2027 with the new ships, but occupancy is 6 points lower.

How much of the profit reaches shareholders

TUI looks cheap on earnings: 4.9 times fiscal 2025 underlying earnings per share of €1.34. That number counts the joint venture profit in full and assumes TUI invests about as much as it depreciates. It doesn't. Net capex plus lease principal was 1.42 times underlying depreciation in fiscal 2025 and 1.53 times over the last twelve months.

So I measure what is left for TUI's own shareholders: underlying EBITDA, minus the non-cash joint venture result, plus the dividends actually received, minus cash tax, cash interest, pensions, restructuring, net capex, lease principal and the dividends paid to minority partners. Interest paid sits in the financing section of TUI's cash flow statement, so aggregator free cash flow (FCF) figures that only subtract capex skip it. Measured this way, fiscal 2025 produced €376.8 million, €262.4 million without the working capital inflow. The last twelve months produced -€266.1 million.

The bridge below shows why my Base needs the joint venture. In fiscal 2027 the consolidated business, after all planned investment, produces -€92.5 million for shareholders even with €250 million of joint venture dividends counted in. By fiscal 2029 it reaches €123.3 million.

The fiscal 2025 bridge gives €378.5 million against €376.8 million from the cash flow statement, and the same lines reproduce TUI's own adjusted free cash flow of €458 million. The thin result is not a definition trick. It is what is left of €2,271.6 million of EBITDA after a business that invests 1.4 times its depreciation pays for leases, interest and a rich minority partner.

Capital, debt and shares

TUI has 507.431 million shares and has not issued any since September 2024. The count went up with the 2023 rights issue that repaid the German state aid. There is also a €487.0 million convertible bond at 1.95% with a conversion price of €9.4956, 30.7% above today's price, which holders can put back to TUI in July 2028. I count it as debt unless a method's value per share would exceed the conversion price, in which case I count the 51.3 million new shares instead. Stock compensation is cash-settled, so it does not dilute.

TUI's net debt includes lease liabilities and swings hard with the seasons: €1,304.9 million at September 30, 2025, the annual low, and €3,615.0 million at December 31, the peak. I use the average of the last four quarter ends, €2,570.0 million, because annual interest and earnings reflect the whole year, not the post-summer low. Add €80 million to take the convertible at its face value and €495 million of net pension obligations.

What does not show up in that figure: TUI's half of TUI Cruises' net debt, about €1.6 billion. Maturities are bunched too. The convertible put (€487 million, July 2028), the senior notes (€500 million, March 2029) and Schuldschein tranches in 2028 all fall inside three years, against a €1,776 million revolving credit facility that runs to March 2030. Ratings are BB-, Ba3 and BB.

Primary valuation: cash for TUI shareholders

The primary method values the cash in the bridge above, discounted at 10%. Fiscal 2027 to 2029 are explicit. At September 30, 2029 I value two pieces separately: the consolidated business at a renewal level of investment, growing 1% a year, and the joint venture dividends, growing 3% a year because the joint venture keeps about half of its profit to fund new ships. Debt is held at today's level, so the financial part of interest stays flat.

Base case inputs, all my estimates:

• Underlying EBIT of €1,296 million in fiscal 2027, €1,378 million in 2028 and €1,411 million in 2029. That is back to the fiscal 2025 level by 2029, in line with management's stated "ambition to build towards the prior-year level," and not above it. The €250 million cost program adds about €75 million in 2027 and €100 million in 2028, and weak bookings absorb part of it.
• Renewal investment at 1.10 times depreciation. TUI does not split maintenance from growth spending for the group. From fiscal 2025 components I get 1.066 times, and I round up because hotel "growth" capex often turns out to be replacement.
• Growth spending above renewal earns 9% after tax from the following year, roughly the cost of equity, so it creates little value.
• Joint venture dividends of €250 million, €262 million and €275 million, below the €293.1 million of the last twelve months.
• TUI keeps 81.8% of the return on growth spending; the rest belongs to the minority partner in RIUSA II. That assumes 60% of hotel growth spending sits inside RIUSA II, which is my estimate. The one data point that measures it more directly, RIUSA II's investing cash flow of €282.8 million against €364 million of hotel net investment in fiscal 2025, points to about 78%; with that share the Base would be about €9.16, and the verdict stays Hold.

This is the table that explains the stock. Of €8.67 a share, €7.30 is the joint venture dividends and €1.37 is everything TUI actually runs. 99% of the value sits in the 2029 exit value. The convertible stays debt here: converting would give €8.34, below the conversion price.

Sensitivity: value per share, renewal investment against discount rate

The grid shows the triangulated value, both methods moving together. The discount rate matters more than the renewal split. The value falls below the price of €6.58 only at a 12% discount rate combined with renewal investment of 1.15 times depreciation or more. Each €100 million of EBIT a year less costs €1.76 a share; €100 million more adds €1.44.

Secondary valuation: EV/EBITDA, sum of the parts

The cross-check values the consolidated business on its own EBITDA, without the joint venture result, and adds the joint ventures and subtracts the minorities on their earnings. Enterprise value (EV) is equity plus net debt. I don't pick the multiple from a table; I derive it from how much of core EBITDA turns into cash at renewal-level investment.

The 3.70 times multiple is low on purpose: TUI has to reinvest about 57% of core EBITDA just to renew its aircraft, hotels and leases. Here the value per share is above the conversion price, so the convertible counts as converted. Again, 70% of the value is the joint venture stakes.

History and growth diagnostics

I don't use a historical multiple range. The years before fiscal 2024 include the pandemic, state aid, a rights issue and a reverse split, and I did not collect a clean multiple history or a peer table for European travel groups. For context only: the 52-week range is €6.08 to €9.558, the price is 4.9 times fiscal 2025 underlying earnings per share, and EV including leases and pensions is 2.89 times trailing underlying EBITDA.

The growth-adjusted check (PEG) is a diagnostic, not a value. On my own fiscal 2027 underlying earnings estimate of €1.16 a share, the forward P/E is 5.7 times, and growth of 6.3% gives a PEG of 0.90. I would not read that as a bargain. The earnings include about €455 million of non-cash joint venture income, and part of the rebound is simply the absence of this year's shocks. Free cash flow per share on my Base falls from €0.74 in fiscal 2025 to €0.24 in fiscal 2029, because growth spending rises faster than profit. Fiscal 2025 was flattered by working capital, and the last twelve months were dragged down by it.

Valuation triangulation

The two Base values are 18.9% apart, which looks like reasonable agreement. I take no comfort from it. Both methods put most of their value in the same joint venture stakes and both rest on the same EBIT path and renewal split, so they are not independent witnesses. The real disagreement is about the consolidated business: €697 million in the cash method, €1,612 million in the EV method. The difference is the growth spending in the transition years and the cost of carrying gross debt against customer prepayments, which the cash method pays and the EV method assumes away. The weight leans to the cash method because cash conversion is the question for TUI.

What is the market already pricing in?

At €6.58 the market value is €3,339 million. If I value the joint ventures and the minorities at 8 times their earnings, the market prices the consolidated travel business, after debt, pensions and minorities, at -€421 million. That is 2.52 times core EBITDA, against 3.70 times in my Base.

Put in operating terms, the triangulated Base equals the price if underlying EBIT is about €159 million lower every year than my Base path: €1,137 million in fiscal 2027, below the low end of this year's guidance, and €1,253 million in fiscal 2029, roughly this year's guidance midpoint and never back to fiscal 2025. The market also behaves as if TUI needs 1.25 times depreciation just to renew its assets. The cash method alone needs €123 million less EBIT a year. All of that assumes TUI Cruises keeps paying about €250 million a year.

That is real pessimism about the tour operator, and it is not unreasonable after a year of falling bookings and a guidance cut. It is also pessimism that leaves the joint venture untouched.

Bear, base and bull scenarios

I assign no probabilities. The discount rate, the growth rates, the renewal split and the 8 times earnings multiple are the same in all three columns, so the scenarios move only the operating inputs. In the Bear, the consolidated business produces negative cash even at renewal-level investment, so nearly all of the €4.82 is the joint venture. The Bull is held back by the convertible, which turns into 51.3 million new shares once a method's value passes €9.4956.

How the buy price is set

A grade D Confidence score starts the margin of safety at 50%. I add 5 points for the financial tail: a €3.6 billion seasonal debt peak, about €1.6 billion of joint venture debt off the balance sheet, and a pandemic precedent in which the state had to step in and a rights issue repaid it. No other modifier applies; the risk of a payout cut at TUI Cruises is in the Bear and in the Confidence score, and I don't charge it twice. The required MOS is 55%, and the maximum buy price is €9.40 times 0.45, or €4.23.

Because the value is sensitive to several estimated inputs, the maximum buy price moves with them. Across the reasonable single-input tests, it runs from €3.44 to €4.88. Buy only if the price is inside or below that band; above it, the verdict stays Hold.

The value today and the return at today's price are separate numbers. If my Base cash flows and exit value come true, buying at €6.58 earns a modeled 20.6% a year. That is not a second valuation. An investor who wants 12% a year on the same Base would pay up to €8.22, one who wants 15% up to €7.59. The margin of safety asks for more than either, because the Base itself is the uncertain part.

Dividend

TUI paid €0.10 a share for fiscal 2025 in February 2026, the first dividend since the pandemic, a 1.5% trailing yield at €6.58. The policy is 10% to 20% of underlying earnings per share, which on my fiscal 2026 estimate of €1.09 means €0.11 to €0.22. The fiscal 2026 dividend will be proposed in December.

The dividend is covered by earnings, not by cash after growth spending. In my Base, paying it while funding growth means TUI borrows about €231 million more across fiscal 2027 and 2028. There is no buyback.

Reasons to own TUI

• The joint venture stakes cover the market value. At 8 times fiscal 2027 earnings they are worth about €3,760 million, against a €3,339 million market value.
• The profit sits in assets that are hard to copy. Hotels and cruises earned €1,216 million of the €1,483 million segment EBIT in fiscal 2025, under strong brands like Riu and Mein Schiff with repeat customers.
• The balance sheet was repaired. State aid is fully repaid, the state credit lines are terminated, leverage was 0.6 times at the September low and the dividend is back.
• The bar in the price is low. The price equals my value if EBIT stays about €159 million a year below the Base path, never recovering beyond this year's guidance midpoint.
• A cost program with a date. About €250 million of savings in Markets + Airline, fully in place by fiscal 2028.

What could go wrong?

• Thesis breaker: demand and shocks. Booked revenue is down 7% for the winter and was down 5% for the summer, and fiscal 2026 already absorbed a war and a hurricane. Each €100 million of EBIT a year less costs €1.76 a share.
• The joint venture's cash is not TUI's to command. TUI Cruises decides its dividend with its partner while it funds new ships for fiscal 2031 and 2033 and carries about €3.24 billion of net debt. A payout like fiscal 2024 (€40 million in total) instead of fiscal 2025 (€440 million) would remove most of the upside.
• Refinancing. The convertible put, the senior notes and Schuldschein tranches fall in 2028 and 2029. The revolving credit facility has a covenant of 3.0 times net debt to EBITDA.
• Growth spending that is really renewal. Investment runs at 1.4 to 1.5 times depreciation, net capex guidance is €810 million to €830 million for fiscal 2026 and management expects return on invested capital to fall this year. If more of it is replacement than I assume, the cash for shareholders stays thin; at 1.20 times depreciation my Base would be €7.59.

Management execution

The current management did the hard part of the repair: the state aid and the state credit lines are gone, leverage fell from 0.8 times to 0.6 times and the dividend came back. Forecasting has been weaker. Fiscal 2026 guidance in December 2025 promised underlying EBIT up 7% to 10% and slightly lower net debt. In April it became €1.1 billion to €1.4 billion with revenue guidance suspended and net debt rising, and in September €1.2 billion to €1.3 billion. Capex guidance was cut twice. The CEO and a supervisory board member bought shares on September 23, 2026; the sizes were not available. Assessment: 9/20, a mixed track record.

Stock Analyza scorecard

Five years of history include pandemic losses, state aid and a rights issue, so the growth lines score nothing, and a 5.8% group margin with a 1.0% tour operator margin earns nothing on unit economics. Hotels and cruises bring repeat customers and a real pipeline, which is where the two points come from. Character: unchanged. TUI is shifting from leasing to owning aircraft and hotels, which changes the funding mix but not the risk class.

Business quality is 36/100: moat and pricing power 8/20, return versus cost of capital 5/20, balance sheet and resilience 6/15, earnings and cash flow quality 4/15, growth and runway 6/15, management and capital allocation 5/10, dilution and governance 2/5. Good assets, wrapped in a low-margin, capital-hungry tour operator. The valuation score is 70/100: discount to Base 40/40, protection against the Bear case 8/20, agreement between methods 8/15, historical valuation 5/10 (neutral, no history used), market-implied expectations 7/10 and data and model quality 2/5. It sits exactly on the boundary between bands, and I don't treat it as evidence in either direction.

Confidence score

Fiscal 2025 is audited, but fiscal 2026 is not reported yet, and the group split between renewal and growth investment and the joint venture's fiscal 2026 payout are not disclosed. Leisure travel is cyclical and exposed to wars and storms. The two methods share their main driver, and the Bull and Bear values sit 75% of the Base apart.

What I would watch from here

Today's readings: cash for TUI shareholders over the last twelve months is red today at -€266.1 million, and winter 2026/27 booked revenue is red today at -7%. Investment at 1.53 times depreciation is yellow. Fiscal 2026 guidance of €1.2 billion to €1.3 billion straddles the green line of €1,290 million for fiscal 2027. The December 9 report will give the September net debt, the TUI Cruises dividend and fiscal 2027 guidance in one go.

The three most important thesis breakers

1. Fiscal 2027 underlying EBIT below about €1,192 million, €104 million a year below my Base path, which alone takes the value to fairly valued.
2. Joint venture dividends below €180 million in a fiscal year, or TUI Cruises cutting its payout toward the fiscal 2024 level.
3. Investment above 1.6 times depreciation for two years without EBIT growth, or net debt at September 30 above €2,100 million.

Stress test and independent check

All values come from one model, and a separate script recomputed the scenarios, both methods, the sensitivity grids, the reverse valuation and the margin of safety from the raw inputs. Reported figures come from the audited fiscal 2025 and 2024 annual reports, the reviewed first-half fiscal 2026 report, the third-quarter statement, the September 22, 2026 pre-close update, TUI's financial factbook and investor presentation. The price is the October 14, 2026 Xetra close, confirmed by two independent sources.

No single test moves the value below the price, and none moves it high enough for a Buy at €6.58, which would need a Base of €14.62. The combinations are different. Four mildly unfavorable inputs together take the value to the price, and the conservative combination, seven estimated inputs at their adverse end, gives €4.18, which would be a Reduce or Sell. The Hold rests on the price being above the maximum buy price, not on the Base being safe.

The strongest counter-thesis, for the bulls: TUI trades at 4.9 times last year's earnings, its joint venture stakes are worth more than the whole market value, and the cost program is contracted. With renewal at depreciation, the joint ventures and minorities at 10 times, joint venture growth of 3.5%, an 11% return on growth spending, a lower net debt basis and EBIT €50 million a year higher, the value is €13.10. The response is that even that combination stays below the €14.62 a Buy would need, and every piece of it leans on cash TUI does not control.

Main data limits: fiscal 2026 is not reported, TUI does not split maintenance from growth investment for the group, the joint venture's fiscal 2026 payout is not known before the annual report, and no peer or historical multiple table is used. The EBIT path, the renewal factor, the joint venture dividends and their growth, the return on growth spending, the share of growth spending inside RIUSA II and the multiples are my estimates.

Final verdict: hold at €6.58

TUI is two businesses in one share. Half of a cruise line that paid TUI €220 million last year, and a tour operator, airline and hotel group that consumed cash over the last twelve months. My Base value of €9.40 is mostly the first. The market's -€421 million for the second is harsh, but it is a judgment on a business whose bookings are falling and whose investment ran at 1.53 times depreciation over the last twelve months.

Verdict: HOLD at €6.58, watchlist for new money. Triangulated Base value €9.40, upside 42.8%, Confidence D (12/25), required margin of safety 55%, maximum buy price €4.23 (band €3.44 to €4.88).

The main risk to this verdict is not the tour operator but the payout decision at TUI Cruises, which TUI shares with a partner. If you buy TUI for the ships, you are buying a dividend someone else co-signs.

Sources

Primary sources include TUI's Annual Report 2025 (audited fiscal 2025 statements, joint venture note, lease note, minority interests and RIUSA II sub-group cash flows) and the Annual Report 2024, the half-year report for the first half of fiscal 2026, the quarterly statement and results presentation for the third quarter of fiscal 2026 (August 12, 2026), the first-quarter fiscal 2026 presentation, the pre-close trading update of September 22, 2026, the TUI financial factbook (August 2026) and the investor presentation of September 22, 2026, all on TUI Group investor relations. Convertible bond terms are from TUI's convertible bond page. The closing price comes from stockanalysis.com, cross-checked with Yahoo Finance. Analyst consensus and broker price targets are not used.

The reference market price is the Xetra regular session close of €6.58 on October 14, 2026. Balance sheet figures are as of June 30, 2026 unless stated; net debt in the EV method is the average of the last four quarter ends. Values per share use 507.431 million shares, with the convertible counted as shares only where a method's value exceeds the conversion price. EBIT paths, joint venture dividends, the renewal split, scenario values and robustness tests are analytical estimates, not company guidance.