European tour operators

DER Touristik turns European with Kuoni deal

Germany’s DER Touristik will become Europe’s clear third-largest tourism group behind TUI and Thomas Cook with the historic takeover of Kuoni’s European tour operators by parent company Rewe for a relatively low price.

June 23, 2015

Rewe will pay an undisclosed sum for the acquisition of all of Kuoni’s tour operators, travel agencies and associated businesses in Europe, with some 2,350 staff, under the agreement announced yesterday (June 22). Analysts from the Züricher Kantonalbank and Bank Vontobel estimated the likely sale price at about only CHF 120 – 130 million due to the weak financial results of the tour operator businesses, which was below Kuoni’s targeted sale price. The Swiss group is exiting the traditional tour operator business after more than 100 years under a strategic U-turn.

The takeover, covering 40 companies in total, needs to be approved by EU and Swiss competition authorities but problems are not expected, and the transaction is scheduled to be completed in the third quarter of 2015. However, the Swiss group’s tour operators in Hong Kong/China and India are not part of the mega-deal and will be sold separately.

DER Touristik will grow into a pan-European group with revenues of about €7 billion (and some 7.7 million customers) with the takeover of the tour operator businesses in Switzerland, Scandinavia/Finland, the UK and Benelux, which have combined revenues of about €2 billion and 1.5 million customers. In comparison, TUI had group revenues of some €18.7 billion and Thomas Cook of about €10.7 billion last year while DER Touristik (€4.9 billion) was just ahead of Kuoni (€4.7 billion).

Kuoni’s large tour operators generate about €1.2 billion in revenues, the specialist brands about €400 million and the rest is generated by travel agencies, including 82 outlets in Switzerland and 34 travel shops in the UK. The Nordics are the biggest tour operator business with turnover of CHF 844 million in 2014 and number three in the region. In Switzerland, Kuoni is the market leader with turnover of CHF 679 million (2014). Kuoni UK, with revenues of CHF 410 million (2014), is a leading specialist long-haul tour operator while the Benelux business is relatively small with revenues of about CHF 37m.

Tour operators in all major outbound markets

The deal means that the German group has beaten off Swiss group Hotelplan and financial investors to take over Kuoni’s European tour operators in one single move, thus gaining potential scale benefits and synergy effects. At the same time, the threat of large-scale job losses at Kuoni Switzerland following a possible merger with rival Hotelplan has been avoided.

DER Touristik will retain all existing businesses under their current brands, including Kuoni in Switzerland and the UK, and Apollo in Scandinavia. Kuoni’s diverse European tour operators offer premium holidays on the Swiss and UK markets, mass market holidays in Switzerland and Scandinavia, modular long-haul holidays (Benelux), and various other specialist holidays. The deal also covers the small integrated Scandinavian airline Novair and the Playitas holiday resort on Fuerteventura.

In future, DER Touristik will thus have tour operator activities in the three major European outgoing markets (Germany, UK, Nordics) along with attractive mid-sized markets such as Switzerland, Austria and Benelux, and emerging markets in Central and Eastern Europe (Poland, Czech Republic, Slovakia, Hungary).

Internationalisation and cross-border synergy effects

Rewe said it aimed to create “an internationally networked group organisation and culture” and highlighted the potential sales, contracting and destination services synergies between DER Touristik and the Kuoni businesses. These include for modular holidays (Germany, Switzerland, UK, Benelux) as well as for mainstream package holidays (Germany, Scandinavia, UK, Switzerland).

At present, DER Touristik is the second-largest tour operator in Germany through its package holidays and specialist holidays divisions and also the largest travel agency chain, is active in Austria (ITS Billa Reisen), has a small Swiss operation (ITA Coop Travel) and tour operator subsidiaries in several Central/Eastern European markets (Exim Tours).

Welcoming the deal, Rewe Group CEO Alain Caparrros said: “With this takeover, the Rewe Group is significantly strengthening tourism as the second pillar of its business. This acquisition will bring us decisively forward in European tourism.” He stressed that Rewe was financially strong enough “to use opportunities when they make sense and fit into our long-term strategy”.

DER Touristik CEO Sören Hartmann commented: “Kuoni and DER Touristik stand for high quality and excellent travel advice. Our customers and our partners in 179 travel destinations will profit from the bundling of our forces. Our source markets complement each other ideally. This is an important contribution to our sustainable profitable growth.”

Kuoni refocuses on travel services

Kuoni CEO Peter Meier
Photo: Klaus Hildebrandt

Kuoni Group announced in January 2015 that it would be concentrating on its core business as a service provider to the global travel industry and governments. The Swiss company now consists of three divisions: Global Travel Distribution (GTD), Global Travel Services (GTS) and VFS Global.

However, the tour operating exit will have a heavy price for the Swiss group. Kuoni said the sale is likely to have a financial impact of about CHF 180 million on the half-year results, including the seasonal half-year losses, transaction costs and an impairment charge on goodwill along with substantial currency effects. The tour operating division had a low profit of only CHF 12.9 million last year, impacted by Apollo’s losses in Scandinavia.

Nevertheless, Kuoni CEO Peter Meier highlighted the positive effects for the company and staff. „The successful sale of our European tour operating activities marks a significant milestone in the development of the Kuoni Group. European tour operating has been closely associated with the Kuoni name for more than 100 years. Our tour operating businesses and all their brands are now being taken over by the Rewe Group and its experienced DER Touristik travel division, which will integrate them into its growth strategy. I am pleased that with this sale we have found an ideal, forward-looking, long-term solution for our customers and employees.“

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