TUI wants to expand beyond its core German and European markets by targeting the new middle-class in fast-growing emerging markets around the world.
Europe’s biggest tourism group this week unveiled its ‘TUI 2022’ global expansion strategy, announced the sale of specialist brands, and presented its results for the first quarter of 2016/17, including current booking trends.
TUI will expand into and develop new source markets in regions such as Southern Europe, Asia and Latin America, many of which it already offers as destinations. Countries such as Spain, Italy and Turkey, China, India and Thailand, Mexico, Brazil, Chile and Colombia are seen as strong potential growth markets.
CEO Fritz Joussen said: “Markets such as Asia and South America are regions with rapidly growing middle classes, who are gaining new opportunities to travel and discover the world thanks to growing prosperity. We are aiming to push expansion of our brand ahead in these markets.”
Over the next five years, the company aims to win at least one million additional customers from these new markets, generating additional revenues of €1 billion. TUI will largely target these markets through a digital strategy on the basis of a digital, standardised, globally scalable software architecture, including smartphone apps, rather than through traditional sales channels such as travel agencies.
The ‘TUI 2022’ growth programme also continues the strategic focus on expanding the group’s cruise and hotel businesses.
Separately, TUI announced that it has sold off its Travelopia unit, with more than 50 specialist brands, to private equity group KKR for £325 million (€381 million) and will invest the proceeds in new hotels and cruise ships.
In the October – December 2016 quarter, TUI reduced its seasonal winter loss by 45% to €90 million with turnover up by 2.3% to €3,286 million. The hotels business contributed operating profits of €49 million, up 94%, and cruise profits more than doubled to €19 million.
Among source markets, the Northern Region, covering UK and the Nordics, saw turnover drop 5% to €1.2 billion but seasonal operating losses were reduced by 43% to €20 million.
In the Central Region, including Germany, revenues grew by 4.7% to €1.14 billion but operating losses nearly doubled to €52 million. This included €22 million worth of costs from the TUIfly flight cancellations last autumn.
On summer 2017 trading, TUI said overall bookings are up by 4% and revenues by 9%. The UK has a 3% bookings increase and 12% revenue rise, but no figures were disclosed for Germany.
Joussen told the AGM in Hanover that negotiations are continuing with Etihad over the creation of a joint leisure airline holding for TUIfly and part of Air Berlin. These were “not easy” but he hoped for a good agreement and then approval by regulatory authorities.