Annual Report 2014/15 Annual Report 2014/15
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TUI IS ON
COURSE
FOR GROWTH

Friedrich Joussen is the CEO of the TUI Group. In this interview he reflects on how the integration process has progressed since the merger of TUI AG and TUI Travel PLC, outlines the Group’s plans for growth and talks about the great challenges of transformation for the age of the Internet.

Mr Joussen, with the merger of TUI AG and TUI Travel PLC in mid-December 2014, you created the world’s leading tourism group. How happy are you with the way the new TUI Group is shaping up?

JOUSSEN: In many areas the integration process was much faster than we originally thought possible. No doubt it was facilitated by the new flat structure that we established in mid-2015. In addition to that, we have achieved our ambitious business targets, in spite of all the changes the merger brought. There is noth­ing automatic about that. It shows how magnificently our 76,000 employees in 180 countries have worked together and given their best for our customers. So together I reckon we have got off to a good start. What binds us all today is the strong TUI brand.

Why does the Group need a new structure?

JOUSSEN: The industrial rationale behind the merger was to create a close interweave between the tour operators on the one hand and our own hotel and cruise companies on the other. By restructuring the Group we accelerated that move. Besides, the new set-up has reduced the tiers in the hierarchy, making us altogether leaner, more agile and also more competitive.

Does the new, leaner structure for the TUI Group mean the integration process is now complete?

JOUSSEN: Those were major steps, but we still have quite a way to go. In the run-up to the merger, we raised the prospect of substantial synergies, not least with our investors in mind. Developments so far make us optimistic that we will fully achieve our targets for savings by financial year 2016/17.

»We want to win customers, increase sales, and open up new – especially year-round – destinations.«

FRIEDRICH JOUSSEN

What synergies are those exactly?

JOUSSEN: Firstly, as we merge the Group functions exercised by TUI AG and TUI Travel PLC we expect to make substantial savings by cutting down on overlap­-ping functions and reducing external costs. After a few months, we internally reviewed our original assumptions about the synergy potential and raised it by five million euros to total 50 million euros by 2016/17. At the same time, we will need to spend ten million euros less on one-off expenses to make those synergies happen, so we have now reduced the figure in our original planning to 35 million euros. That shows how focused we are on creating the optimum structure for our new Group.

Where else do you see potential for savings?

JOUSSEN: Under the umbrella of TUI Destination Services, we have pooled all our destination-related services, such as transfers and excursions, which used to be provided by six country-specific units. Thanks to this new, integrated business area within the tourism segment, we hope to save another 20 million euros annually from financial year 2016/17 onwards. Moreover, as an integrated group we can make better use of the sizeable tax losses currently carried forward by TUI AG.

For the next three years you want to see EBITA increase by at least ten per cent on average. You won’t manage that just by saving costs.

JOUSSEN: We have a clear strategic agenda. And our course is set for growth. We want to increase sales, win customers and create new destinations, especially ones that people can visit all year round. Thanks to the merger, we cover the complete value chain in tourism in a way none of our competitors can offer. We can accompany our customers all the way from the booking via the flight to the hotel or club experience. And unlike classical tour operators or online portals, we own the assets that differentiate the holiday, what we call the content: hotels, clubs and cruise vessels. So in future we will concentrate less on the agency services and more on this content. That is the core of our business model. Our own hotels and ships are key factors in our growth, and that is where we will be investing.

What is the road map for those operations?

JOUSSEN: As far as our hotels and cruise operations are concerned, we have a very clear plan for expansion. Above all, it will help us to boost profitability consider­ably. By financial year 2018/19 we intend to expand our hotel portfolio by about 60 new facilities of our own, under our core brands RIU, Robinson, Magic Life and our new hotel brand TUI Blue. The TUI range also includes our three hotel concepts Sensatori, Sensimar and Family Life. We will likewise build on our cruising fleet, which currently operates 13 vessels. In the coming years TUI Cruises will acquire Mein Schiff 5 to Mein Schiff 8. When we bought the Splendour of the Seas in spring 2015, we launched a wave of modernisation at Thomson Cruises, and that will continue. On top of that, Hapag-­Lloyd Cruises operates the best luxury and expedition ships in the World of TUI. In addition, we shall be taking a close look at the areas where the three cruise businesses could work more closely together to tap into potential synergies.

Will you be focusing your hotel investments in particular regions?

JOUSSEN: One focus will no doubt be the long-hauls, where the rate of increase is 40 per cent in some cases. The Caribbean is especially interesting and is bringing in strong growth. But we will also be looking very carefully at destinations around the Indian Ocean. The second Robinson Club is just being constructed on the Maldives, for example.

With all these positive developments, is there any work in progress that still needs addressing?

JOUSSEN: We need to be very clear that so far the restructuring and the corporate merger have been at the forefront of attention. There is one major task we still need to tackle, and that, without a doubt, is to transform the Group for the age of the Internet. I see a huge challenge for us there. The groundwork had been laid, both for the human resources and for the strategy.

How are you going to deal with online platforms such as Booking.com and Expedia?

JOUSSEN: Basically you can’t compare Internet operations with companies in the classical sense, although a lot of people try. Our advantage over the pure booking agencies is that we have our own products, especially the hotels, the ships, extremely individual products and programmes for our guests. At the same time, these booking platforms are creating new ways for us to sell our products. We can actually earn money by placing a certain amount of our own content capacity on Inter­net portals like that. There is no reason why this shouldn’t complement our own strong distribution channels.

And where do you see a need for action?

JOUSSEN: TUI is above all active in Europe, whereas providers like Booking.com have a global presence. If we are going to regard our business as “content plus market access” in future, that will have implications in terms of our internationalisation. Why don’t we take customers from Turkey to our hotels in the Mediterranean? Or from Brazil to our fantastic hotels in the Caribbean? In China there is an emerging middle class with money to spend and a desire to travel. We have to ask ourselves how we intend to tap into these new markets for ourselves. The way I see it, we can only do that online. We have launched an initial pilot in Spain, where we don’t have a nationwide presence with our own tour operator and travel agencies. That can be transposed to other markets. The important thing is to have top-class IT.

And what does it mean for the brand?

JOUSSEN: For the future we have a clear one brand strategy, and within a foreseeable period we will be visible in all markets under the core brand TUI. In the Netherlands and France we have already completed the rebranding campaign. Now the other countries will follow suit.

Will anything change due to Peter Long’s move to the Supervisory Board?

JOUSSEN: I am grateful to Peter Long for our very constructive and open partnership. In the year we have spent together at the helm of the TUI Group, we have always pulled together and forged a genuine team along with the other members of the Executive Board and in the Group Executive Committee. Otherwise the rapid, smooth integration of the two companies would never have been possible. I shall continue to lead the Group in that spirit and foster a culture of working together, for the benefit of our shareholders, our customers and our employees.