Strategic acquisition

TUI buys back Destination Management to profit from excursions and activities

Europe’s largest tourism group has re-acquired part of former subsidiary Hotelbeds so it can offer a ‘one-stop holiday experience’ by selling more destination activities to customers in advance.

April 03, 2018
TUI wants to sell more destination activites
Photo: TUI

TUI has bought Hotelbeds’ Destination Management unit for €110 million, less than two years after selling the entire Hotelbeds Group, including the large B2B bedbank business, to financial investors for €1.2 billion. The German-based tourism group has decided that destination services will be one of its strategic growth areas in future. In contrast, Hotelbeds wants to focus on its core business after recent acquisitions, and had no strategic interest in this activity.

In future, Palma-based TUI Destination Services will be the world’s largest provider of destination activities with turnover of €700 million, some 9,000 employees and present in 48 countries. It will offer excursions, tours, trips and other local activities not only to TUI’s own 20 million customers but also to other tour operators and, notably, cruise companies at ports of call.

The TUI division is already one of the top five providers in this business field, with 6,500 staff in 23 countries, handling about 12 million passengers and selling some 4.5 million excursions per year, mostly to TUI Group customers. Hotelbeds’ Destination Management division, with 2,600 employees in 25 countries, provides excursions, transfers, tours and activities to diverse tour operators, handles around 2.2 million passengers a year, and also offers cruise handling services in ports.

The global market for services at holiday destinations is estimated at around €140 billion and is growing at about 7% a year, according to TUI. Yet, with up to 350,000 micro-suppliers, it is extremely fragmented on the supplier side. Large tourism groups are increasingly expanding into this lucrative market segment.

TUI CEO Fritz Joussen explained: "The global market for these services is growing. Four factors put TUI in an extremely good starting position: our strong international brand, the trust of 20 million customers, the trust of the destination countries through decades of presence and, most importantly, our world-class IT and CRM systems, in which we have invested in recent years".

TUI emphasised that it particularly wants to make better use of the average four-month period between a holiday booking and the time of departure in order to make customers individual offers for their stay at the destination.

"The TUI brand guarantees the usual premium service, TUI quality and TUI comfort despite the multitude and complexity of leisure offers and providers at the holiday destination. Our IT and CRM systems guarantee that our guests will only receive offers that are relevant to them. And they get them directly from us, not from third parties. Advice, booking, flight, hotel and leisure activities at the resort come from a single source. The customer has one contact person, that is TUI," Joussen declared.

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